2021 was a difficult year for Amazon (AMZN). Marking a reversal to 2020’s outstanding display, the stock’s muted performance reflected real-world trends and headwinds. For Guggenheim analyst Seth Sigman, factors constraining growth included “supply chain capacity and labor shortages, product in stock, and competing store traffic.”
Although the analyst still sees “some lingering pressure” in Q1, the analyst finds much to be buoyed about moving forward. “We would be buying this stock early in FY22 ahead of stronger, more normalized growth starting in Q2,” the analyst confidently said.
Following 2020’s lockdowns, as anticipated, the reopening in 2021 affected online sales, but as of November, according to Census data, the gap between sales growth for online and retail stores is closing. “This is most representative of what has happened with AMZN from both a fundamental and sentiment perspective,” notes Sigman. Bearing in mind that following a record November 2020, online penetration remained roughly flat year-over-year even as retail traffic “rebounded,” Sigman believes this is “encouraging.”
Although the analyst does not expect online sales to completely obliterate retail, yet based on the “current trajectory and comparisons,” he anticipates “some normalization in online channel share gains” starting in Q2/3. This in turn should boost sentiment. As product supply and labor availability improve as the year progresses, Sigman believes Amazon’s own recent efforts to expand supply chain capacity will “support incremental sales and operating leverage.”
As for the most recent quarter, Sigman’s analysis of Q4 of holiday trends is also promising, and suggests the ecommerce giant performed “relatively well,” boasting stronger traffic than other online competitors, despite Prime Day’s shift to June in 2021 impacting sales. While supply chain pressure and increased retail store visits may have had some impact, Sigman believes these are “transitory issues.”
Bottom line, then, what does it all mean for investors? Sigman rates Amazon shares a Buy along with a $4,300 price target. Investors stand to score a 28% gain, should Sigman’s thesis go according to plan in the year ahead. (To watch Sigman’s track record, click here)
Over the past 3 months, 30 AMZN stock reviews have been submitted and all are positive, naturally culminating in a Strong Buy consensus rating. Going by the $4,137.5 average target, shares will appreciate by 23% over the next 12 months. (See Amazon 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.
