Roth Capital Partners analyst Rohit Kulkarni recently hosted a webinar with an Amazon.com Inc. (AMZN:NASDAQ) advertising partner agency discussing trends in Amazon's marketplace. The speaker provided an upbeat outlook on Amazon heading into 2024 based on strong fourth quarter (Q4) and holiday sales momentum.
Kulkarni maintains a Buy rating and a US$180 price target.
Results and Forecasts
Amazon posted US$514 billion in sales for 2022. Kulkarni models accelerating growth to US$623 billion by 2024, driven by expanded Prime adoption and new advertising products. He sees earnings nearly tripling over that span, from a US$0.27 loss to US$3.60 per share.
Holiday Sales Commentary
The advertising partner indicated that the holiday shopping season started early for Amazon, with steady deal activity through December. Campaign performance met or exceeded expectations for most brands on the platform.
Advertising and Commission Rate Updates
While broader advertising rates rose moderately in 2023, Amazon's pricing growth slowed as it launched new lower-cost ad units. This dynamic has boosted advertiser ROI.
In a competitive response to discount apparel rivals like Temu and Shein, Amazon cut seller commissions on some ultra-low-priced clothing SKUs. This reveals Amazon's increasing sensitivity to maintaining category share.
Social Media and Audience Targeting
Amazon's slowly advancing integration with Facebook, Snapchat, and other social platforms holds promise in allowing brands to retarget Prime member audiences. However, the webinar speaker was unenthused about Amazon's initial partnership with Pinterest thus far.
In summary, the report noted that Amazon heads into 2024 with strong e-commerce momentum buoyed by advertising and Prime subscriber expansion.
Valuation
Kulkarni applies a sum-of-the-parts analysis, valuing Amazon's retail, cloud, and advertising units separately. His blended valuation approach yields a US$180 price target.
With dominant market positions across high-growth industries, the analyst sees Amazon sustaining above-market top-line expansion and significantly leveraging operating margins long-term. Advertising and Prime subscriptions should enhance Amazon's wide competitive moat.
Risks
Key downside risks would include online and omnichannel competitors like Walmart and Target taking e-commerce share through better execution or heavier investments. Additionally, higher-than-expected spending on new initiatives with uncertain returns could challenge margin targets and weigh on Amazon's premium multiple.
In summary, Roth MKM's channel checks reaffirm an upbeat outlook for Amazon heading into 2024. The company appears well-positioned to leverage Prime, advertising, and cloud synergies to drive further market share gains.
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Disclosures for Roth MKM, Amazon.com Inc., January 12, 2024
Regulation Analyst Certification ("Reg AC"): The research analyst primarily responsible for the content of this report certifies the following under Reg AC: I hereby certify that all views expressed in this report accurately reflect my personal views about the subject company or companies and its or their securities. I also certify that no part of my compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.
Disclosures: The price target and rating history for Amazon.com, Inc. prior to February 1, 2023 reflect MKM’s published opinion prior to the acquisition of MKM Partners, LLC by Roth Capital Partners, LLC. A household member of the research analyst principally responsible for the preparation of research reports on Amazon.com, Inc. is an employee of Amazon.com, Inc. in a non-officer, non-director, and non-advisory board member position. An Associated Person owns debt or equity securities of Meta Platforms, Inc.. The price target and rating history for Meta Platforms, Inc. prior to February 1, 2023 reflect MKM’s published opinion prior to the acquisition of MKM Partners, LLC by Roth Capital Partners, LLC. The price target and rating history for Pinterest, Inc. prior to February 1, 2023 reflect MKM’s published opinion prior to the acquisition of MKM Partners, LLC by Roth Capital Partners, LLC. The price target and rating history for Snap Inc. prior to February 1, 2023 reflect MKM’s published opinion prior to the acquisition of MKM Partners, LLC by Roth Capital Partners, LLC. A Research Analyst and/or a member of the Analyst's household own(s) debt or equity securities of Amazon.com, Inc..
ROTH Capital Partners, LLC expects to receive or intends to seek compensation for investment banking or other business relationships with the covered companies mentioned in this report in the next three months. The material, information and facts discussed in this report other than the information regarding ROTH Capital Partners, LLC and its affiliates, are from sources believed to be reliable, but are in no way guaranteed to be complete or accurate. This report should not be used as a complete analysis of the company, industry or security discussed in the report. Additional information is available upon request. This is not, however, an offer or solicitation of the securities discussed. Any opinions or estimates in this report are subject to change without notice. An investment in the stock may involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Additionally, an investment in the stock may involve a high degree of risk and may not be suitable for all investors. No part of this report may be reproduced in any form without the express written permission of ROTH. Copyright 2024. Member: FINRA/SIPC.
