KeyBanc/Pacific Crest Starts Amazon.com (AMZN) and Liberty Interactive (QVCA) at Overweight, Starts Wayfair (W) and Blue Nile (NILE) at Sector Weight

KeyBanc/Pacific Crest initiated coverage on e-commerce with a favorable sector view.

KeyBanc/Pacific Crest initiated coverage on Amazon.com (NASDAQ: AMZN) with an Overweight rating and a price target of $800. Liberty Interactive (NASDAQ: QVCA) was initiated with an Overweight rating and a price target of $31. Blue Nile (NASDAQ: NILE) and Wayfair (NYSE: W) were initiated at Sector Weight.

Analyst Edward Yruma thinks e-commerce, which has only a 7.4% overall share of total retail
sales, has significant long-term opportunity. In the next five years, he thinks share could reach 20%.

"We believe that market share will be accorded to retailers with a degree of stickiness to their business models. We believe that Amazon's (AMZN) ecosystem aims (we think successfully) to be a part of the consumer's purchase process for most anything, making it one of the stickiest retailers. Liberty Interactive (QVCA) also has a very loyal customer following (89% retention rate). Wayfair’s (W) stickiness has yet to be fully demonstrated, although there seem to be some promising signs from improving repeat order metrics, and Blue Nile (NILE) needs growth in more frequently purchased non-engagement products," said Yruma.

The analyst continued, "We believe that FCF generation, stickiness, addressable market and competitive gap are key yardsticks to measure e-commerce companies. Both Amazon and Liberty Interactive continue to generate strong FCF. Profitability at e-commerce generally remains below that of traditional retailers (with the exception of Liberty Interactive), so we attempt to gauge herein the potential for earnings growth as investments begin to mature. We also look closely at the competitive gap in retail, and believe that a number of e-commerce companies are expanding the gap relative to traditional retail."

Yruma added, "We believe that e-commerce’s 7.4% market share could grow to exceed 20% over the next five years. We believe that traditional retailers will need to increase investments to combat share loss to e-commerce companies. At the risk of being overly simplistic, we view the role of any retailer as twofold: (1) find a compelling good, and (2) get the good to the consumer. To this end, all four retailers in the report are not simply changing the consumer interface, they are more importantly disrupting operating, merchandising and pricing models."

For an analyst ratings summary and ratings history on Amazon.com click here. For more ratings news on Amazon.com click here.

Shares of Amazon.com closed at $669.83 yesterday.

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