Amazon’s retail segment is expected to play a significant role in driving the company’s share price, according to analysts from DBS Group. These analysts, who have a Buy rating and a price target of $150 on Amazon stock, believe that the e-commerce giant’s retail business is poised for market share growth and margin expansion.
While Amazon’s retail segment has faced challenges in returning to profitability due to various macroeconomic factors in recent years, DBS Group analysts remain optimistic. They note that the US e-commerce industry is projected to grow at a compound annual growth rate (CAGR) of 12.4% between FY23F and FY25F. Furthermore, Amazon continues to dominate the market, accounting for 39% of US e-commerce.
The analysts predict that Amazon’s retail segment revenue will see a CAGR of 10% over the same period, driven by growth in its online stores and third-party seller service. They also anticipate an improvement in retail EBITDA (earnings before interest, taxes, depreciation, and amortization) margins, from 8% in 2023 to 12% in 2025, resulting in a 26% CAGR for EBITDA. Additionally, the analysts highlight Amazon’s flexibility in managing inventory and its popular Prime offering as advantages that contribute to the success of its retail business.
DBS Group expects Amazon’s retail segment operating income to be a key factor impacting the company’s share price starting from 2023, surpassing the operating income of Amazon Web Services (AWS), the company’s cloud computing division.
This analysis suggests that while Amazon’s retail segment is still finding its way back to profitability, it holds significant growth potential in the coming years. As the retail segment completes its fulfillment build cycle, profitability will become a greater focus. The analysts’ positive outlook on Amazon’s retail business highlights the company’s leading position in the US e-commerce market and its ability to capitalize on its inventory management and Prime services.
It’s worth noting that these forecasts and assessments are based on DBS Group’s analysis and should be considered in the context of other perspectives and opinions. Overall, the retail segment’s expected growth and improved profitability could have a substantial impact on Amazon’s share price in the future.
