Amazon (NASDAQ:AMZN) is having its best year yet. The novel coronavirus pandemic led to an unprecedented surge in online shopping, which was a big win for the e-commerce giant. With Prime Day just around the corner, investors are hoping for some big gains in the coming weeks. AMZN stock is up 62% to date, and the biggest shopping event of the year will push its value to new highs.
Analysts concur with this sentiment and believe this stock could go as high as $4,500 this year. The company has already generated $8 billion in ad revenue and this is expected to hit $13 billion for the fiscal year 2020. With a lot of upside potential, an investment in Amazon is a no-brainer.
AMZN Stock Will Score Big on Prime Day
Amazon’s highly anticipated Prime Day will take place on Oct. 14 and 15 and analysts are more bullish than ever on the tech stock. For two days only, Prime members (those who pay the annual $119 fee) can score some major discounts on the site. Although Prime Day is always a huge hit, this year’s event will also help gauge the severity of the economic crisis.
Prime Day 2020 was timed to signal the start of the holiday season, which will look very different this year. As reported by Barron’s, J.P Morgan analyst, Doug Anmuth predicts that the event will generate $7.5 billion in revenue. This would be a 42% increase from the previous year. He anticipates that people will get an early start on their holiday shopping on Prime Day.
But it’s also worth noting that Prime Day isn’t just about increasing sales but also the number of customers on the platform. It is estimated that Amazon added more new members on Prime Day than any other day in 2019. Additionally, Prime members also spend $1,400 annually versus non-members who only spend $600 on average.
Prime Day, is without a question, one of the biggest shopping events of the year. Each year, the event converts millions of people into Prime members. These members are eventually hooked on to Amazon’s vast ecosystem of products. This includes Amazon Echo Speaker, the Echo Dot and Fire TV — the list is endless. Given the historical success of Prime Day, investors are hoping for an early holiday gift next week.
Analysts Are Very Optimistic About Amazon
AMZN stock is trending at $3,277 as of this writing, but analysts see some greater upside potential in the months ahead. As reported by The Motley Fool, Pivotal Research increased its price target to $4,500. This is a 15% increase from its previous target of $3,900. This may seem like a far reach, but Amazon is expected to put up some big numbers this year.
The e-commerce giant estimates its ad revenue will amount to $13 billion for FY 2020 and can go as high as $38 billion by 2023. The company’s cloud component, Amazon Web Services, generated $2.1 billion in Q3 which will be a huge boon for revenue numbers.
Other analysts are in line with this positive outlook. CNBC reports that Mark Shmulik of Bernstein’s is very bullish on AMZN stock. While initially undervaluing the value of this e-commerce business, Shmulik is now all-in on Amazon. He believes that Covid-19 has led to unprecedented gains in the digital ads, cloud and e-commerce industry. Amazon holds the winning card in all three sectors.
The company is also expanding its delivery footprint with 85% of its packages expected to go from desktop to door. This will result in greater economies of scale and cost advantages in the long term. Mark Mahaney of RBC Capital set his price target to $3,800, a 21% increase.
The e-commerce giant’s incredible performance this year has led analysts and investors to place their bets on the tech-giant. I believe AMZN stock is well-poised to deliver the goods.
The Bottom Line on Amazon
Amazon has always been a force of nature in the e-commerce space and the pandemic only strengthened its position in the industry. The upcoming Prime Day will accelerate Amazon’s successful quarter so it can close out the year with a bang.
Despite its recent successes, e-commerce only makes up a small percentage of retail in the U.S. This means that Amazon still has room for a lot of growth, even with a market capitalization of $1.5 trillion. It would be wise to hold on to this stock in any investing environment. A decade from now investors will watch their returns flow in and say “look how far we’ve come.”
On the date of publication, Divya Premkumar did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Divya Premkumar has a finance degree from the University of Houston, Texas. She is a financial writer and analyst who has written stories on various financial topics from investing to personal finance. Divya has been writing for InvestorPlace since 2020.
