Amazon (AMZN) Reiterated as Top Pick, Set to Pass Walmart (WMT) Overall in 2022 - JPMorgan
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The analyst believes that the COVID-19 pandemic pulled forward about 3 years of e-commerce growth, with help from these key factors:
1) The COVID-19 pandemic; 2) large & historically under-penetrated categories gained e-comm traction 3) AMZN continued to execute on 1P/3P delivery efficiencies; 4) traditional B&M retailers shifted focus towards e-comm & BOPIS; 5) elevated store closures (20k+ through 2019/2020); & 6) ongoing shift to mobile commerce (+41% Y/Y in ’20, ~32% of overall US e-commerce in ’20).
Overall, the gap between physical and e-commerce growth more than doubled from about 1,200bps in 2019 (2%& 14%) to around 3,000bps in 2020 (2% & 32%). Hence, it’s no surprise that AMZN’s share of the entire US e-commerce sector soared to 39% last year.
“AMZN’s US GMV reached an estimated $316B in 2020 (+45% Y/Y ex-Whole Foods), accelerating from +22% in 2019, driving 39% share of US e-commerce and almost 8% of total adj. retail sales. AMZN’s accelerated top-line growth at large scale was driven by outsized growth in large & under-penetrated categories (i.e., CPG/Grocery & Apparel), the Prime flywheel (200M+ global subs), & strong 3P seller growth (record 55% of units in 4Q20/1Q21). Going forward, we expect the return of P1D shipping in the US & AMZN’s 50% Y/Y square footage expansion in 2020 to both drive & support future growth.”
As such, AMZN remains a top pick at JPMorgan and maintained its $4,600 price target. One of the reasons behind this call is projection that the e-commerce penetration will continue to increase in 2021 to reach 40%+ long-term.
“While e-commerce gains during the pandemic were initially driven by the closure of B&M stores or consumers hesitant to shop in-person, e-comm has remained strong into re-opening. Specifically, e-comm penetration expanded ~360 bps Y/Y in 1Q21 to 19.3%. We project e-commerce will reach 30% penetration of retail in 2025, and could be 40-50% over time,” the analyst concludes.
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