Wasn’t Amazon.com (AMZN) supposed to be an online retailer? Because we distinctly recall hearing at some point that Amazon.com sold stuff online… and yet it’s what Amazon’s doing offline that earned it a re-recommendation from Bank of America analyst Justin Post.
In a note reiterating his “buy” recommendation and $4,250 price target on Amazon, Post explains that “Amazon is building an ‘omni-channel POS solution’ that includes its own point-of-sale (POS) hardware and software.” And yet, by definition, point-of-sale hardware is equipment used to check out a customer at a physical retail location.
In case you have not yet heard, Amazon — the world’s biggest e-tailer — also has developed quite a number of physical retail locations at which it might install this new “omni-channel POS solution.” Amazon’s physical businesses include: Amazon Books stores, Amazon 4-Star department stores, Amazon Pop Up stores, and Amazon Fresh, Amazon Go, and Amazon Go Grocery grocery stores too. (Oh, and Whole Foods, of course).
In addition to all of those potential outlets at Amazon proper, Post says Amazon is now looking to sell its new “omni-channel POS solution” to third party retailers as well.
As Post observes, Amazon seems to have developed its new solution as “a response to [the Covid] pandemic and Shopify” as well.
Shopify — also originally an online phenomenon — has been promoting its own point of sale system lately with a free trial for business customers. Amazon may see Shopify’s offering as a threat to its own sales, because, as Post explains, “the pandemic has created a greater sense of urgency by local businesses (SMBs) to add multi-channel sales capabilities, and growing number of merchants have been adopting third party services, including Shopify and Google search, to help sell directly to consumers.”
Post notes that there may initially be “resistance” to Amazon’s offering from local businesses that will have “competitive concerns” about letting the fox into the hen house. In the analyst’s view, however, “the opportunity is big” enough for Amazon to risk taking a flyer on this and see if it sticks.
Consider that an Amazon-branded POS system could offer customers the ability to “add Amazon check-out options,” and “even allow customers to pay with their Amazon accounts at retail locations.” If Amazon is able to capture sales data from transactions run through its POS system (as seems likely, and maybe even the whole point), it could yield valuable data for Amazon on other companies’ stores’ “inventory and business analytics.” Amazon would presumably want to re-package this data to provide “customer data management for SMBs” as a service. But Amazon will probably also integrate sales data run through its devices into its own internal data troves as well, the better to understand which products are selling, where, and to whom — so as to better optimize its own product offerings online.
Because in case you have forgotten by now, Amazon was originally and remains in large part today… an online retailer.
Overall, Wall Street likes Amazon, a fact clear from the 32 unanimous Buy ratings on record. The forecast is for one-year gains of ~22%, given the average price target currently stands at $4,225.13. (See AMZN stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.