Amazon: Unit Economics Recovery Could Double the Stock in 2024 – Loop Capital
2022.05.27 16:07
Amazon (AMZN): Unit Economics Recovery Could Double the Stock in 2024 – Loop Capital
By Senad Karaahmetovic
Loop Capital analyst Rob Sanderson reiterated a Buy rating on Amazon (NASDAQ:AMZN) stock amid the recent selloff.
Still, the analyst cut the price target to $2,825.00 per share to reflect a lower multiple for the retail sector. Shares are down nearly 35% YTD.
Sanderson urges investors to “ look for buying opportunities in stalwarts with defensible moats and well-managed innovators that will emerge stronger.” Amazon fits this description.
“We misjudged the magnitude of inflationary pressure and excess capacity in the near-term but continue to think that unit economics will return to historic levels over time. In this note we present a framework for evaluating earnings power as unit economics recover,” Sanderson told clients in a note.
In case the unit economics can increase as expected by Sanderson by 2025, the analyst sees the potential for shares to double in 2024 on forward earnings.
“With what we consider reasonably conservative assumptions for improvement on unit economics, our framework points to retail operating margin of +7.5% by 2025 with about $40B in segment net profit. In this scenario, a 20x forward P/E on retail profits with 30x for AWS and Amazon could be a +$4,000 stock on recovery,” the analyst concluded.
