Holiday season shopping will reach peak mania over the next week. According to a recent Evercore holiday survey, Amazon (AMZN) is still the “top shopping destination across all categories.” That said, firm analyst Mark Mahaney notes that the survey results showed some slightly worrying trends.
First off, there was a “modest decline” in consumers’ purchase plans for Electronics, Accessories, and Clothing/Footwear categories on Amazon this holiday season.
Secondly, around 50% of shoppers intend on heading to a store this year to shop in-person, a 1,100-bps increase on the same period last year.
Thirdly, while last year 54% said they planned on spending more online, only 45% of respondents said they intend to do so this time around.
Mahaney sees several reasons for these “neutral-to-negative read-thrus.”
Evidently, after last year’s pandemic driven pivot to online shopping, consumers are hungry for “experiential/in-store” shopping, although Mahaney considers this trend as “transitory.”
Another possible explanation is that there might be a drop in Amazon’s “relative value prop, relative to other major retailers.” The analyst believes this is probably unlikely as there is no evidence to suggest an ongoing shift to “other large retailers” in the three categories which exhibited a decline.
Another “intriguing thesis” is that consumers are showing a preference for shopping locally in order to help the smaller business which were most affected during the height of the pandemic, although Mahaney is unsure of this theory too.
Nevertheless, the survey’s results lead Mahaney to be “more cautious” on Amazon’s near-term revenue outlook. As a result, Mahaney lowered his Q421 estimates with the revenue forecast now at the mid-point of Amazon’s Q4 guidance range.
That said, Mahaney’s long term thesis remains “intact,” and he believes investors have an opportunity here.
“We see Amazon (like all retailers) facing structurally higher wage/cost pressures, but we’re Bullish on AMZN’s ability to cost-innovate faster than just about any competitor,” the 5-star analyst explained. “For us, AMZN remains one of the highest quality assets in tech. In the past, investors have almost always made $ buying AMZN on dislocations. We don’t believe circumstances are any different now.”
To this end, there’s no change to Mahaney’s Outperform (i.e., Buy) rating or $4,300 price target. According to the top analyst, there’s potential upside of ~26% from current levels. (To watch Mahaney’s track record, click here)
All in all, 30 analysts have chimed in with Amazon reviews over the past 3 months and all are of the same opinion – Buy. The Strong Buy consensus rating is backed by a $4,127.5 average price target, implying one-year returns of 21%. (See Amazon stock analysis on TipRanks)
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