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Amazon ‘s sheer scale and potential for margin improvements should give it a leg up, according to Stifel. The firm initiated coverage of the e-commerce behemoth with a buy rating and a price target of $173. This implies 30% upside from Monday’s close. Shares of Amazon have rallied nearly 58% this year. Despite this, analyst Mark Kelley said the stock’s valuation is attractive. AMZN YTD mountain AMZN ytd chart Kelley pointed out that, since its inception, Amazon has overtaken other e-commerce platforms in terms of sheer scale. This includes its massive selection of items, vast fulfillment network (with some of the shortest delivery windows) and broad third-party seller resources. “While scale matters for its core retail business, it is also the foundation upon which its related businesses have been built (Prime Membership, Advertising, etc.) in addition to the many tangential businesses that contribute to the overall success of Amazon today (AWS, other subscriptions, hardware, and others), and those that may reach greater scale in the future (Amazon Business, healthcare, and others),” the analyst wrote. After Amazon ramped up its fulfillment network and shifted to a more regionalized network versus national, Kelley also expects further upside to operating margins back to pre-Covid levels. The analyst also thinks that there’s more upside potential in Amazon’s digital advertising business, projecting the company’s advertising revenue to reach $64 billion in 2025 versus its $38 billion level in 2022. “The company has expanded beyond retail media to other advertising options, and announced on September 22, 2023 that it would start to include “limited” ads on its Amazon Prime Video platform, starting in early 2024,” Kelley wrote. “We also note that Amazon offers broader ad tech tools and is now a Pinterest advertising partner, offering Amazon advertisers as an incremental demand source.” As an additional catalyst, Kelley pointed towards Amazon’s relative strength in weathering consumer discretionary headwinds. He also noted the company’s likelihood to outpace its peers. Kelley’s comments comes after Amazon held its Prime Big Deal Days event earlier this month. The company said this year’s sales outpaced those of last year’s event . — CNBC’s Michael Bloom contributed to this report.
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