Amazon.com Inc. is the poster child for online shopping, but its core e-commerce business is still “underappreciated” on Wall Street — at least according to a Wedbush analyst.
Scott Devitt joined a pair of other Wedbush analysts in beginning coverage of Amazon
AMZN,
with an outperform rating Monday, as part of his broader initiation of internet names. But only Amazon earned a place on Wedbush’s best-ideas list.
Amazon’s e-commerce business has faced tough comparisons with pandemic-era periods, and the company has also endured some growing pains within its fulfillment operations. But with comparisons easing and fulfillment utilization on the rise, “Amazon’s core business is now well positioned with an industry-leading fulfillment infrastructure delivering 4x as many same-day or next-[day] orders in the U.S. versus 2019,” Devitt wrote.
The company gets the benefit of an improving e-commerce landscape, in Devitt’s view, but other aspects of its business are compelling as well. For one, Amazon’s AWS cloud-computing business is showing a stabilization as it laps a period when customers started optimizing their spending to manage expenses.
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“With recession fears fading in the U.S. and interest rate increases moderating, Amazon is beginning to see stabilizing AWS growth and noted that its customer base is now mostly optimized for costs,” Devitt wrote.
AWS is “well positioned competitively in our view and we expect sustainable double digit AWS growth in the intermediate term as more workloads shift to the cloud and demand for generative AI creates incremental spending in the coming years,” he continued.
Devitt also weighed in positively on Amazon’s advertising business. The company is “the clear leader among retail media networks given its wealth of transaction data and the scale of its site traffic,” and Amazon’s advertising business should continue to expand more quickly than its gross merchandise volume going forward, in Devitt’s view.
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He’s even intrigued by Amazon’s grocery initiatives after the company announced plans to merge grocery offerings into a single cart. “We believe Amazon’s fulfillment
expansion and improving delivery speeds are a catalyst for grocery category growth, as an increasing percentage of American consumers can get a variety of grocery and everyday essentials delivered same-day or next-day,” he wrote.
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