Amazon Stock Gets a Price-Target Hike. Why UBS Sees It Hitting $4,700.

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Amazon is increasing fees for third-party sellers using its Fulfillment by Amazon service from early 2022.

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Leon Neal / Getty Images

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According to analysts at UBS, Amazon stock could reach $4,700 next year as revenue growth and higher margins drive estimate revisions.

It hasn’t been an easy year for Amazon (ticker: AMZN) and its third-quarter earnings highlighted a host of problems, including supply-chain issues, high wage costs and a tough comparison with 2020, a bumper year for the company. . The stock is up about 6% year-over-year compared to the S&P 500’s 20% gain.

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Still, analysts at UBS believe that 2022 could be another blockbuster year for the stock.

The Swiss bank assumed coverage of the technology giant with a buy rating and a 12-month price target of $4,700, up from its previous target of $4,020.

The new target price, one of the highs on Wall Street, implies up 36% from Amazon’s closing price of $3,443.72 on Wednesday. The stock gained in premarket trading on Thursday.

“We expect Amazon shares to re-rate before 2H22, when we see forecast revisions and multiple expansions driving revenue growth and higher margins,” analysts led by Lloyd Walmsley said in a note.

He noted that Amazon has “multiple levers” to improve margins, including advertising, Amazon Web Services (AWS) and price increases. Slower capacity building and higher pricing could lead to better-than-expected margin turnaround in the second half of next year, he added.

Amazon’s earnings couldn’t have been worse

Amazon has been increasing fees for third-party sellers using its Fulfillment by Amazon (FBA) service since early 2022. UBS analysts said the e-commerce giant may follow up with a price hike for its flagship offering after two years of heavy investment. , Since the last increase in 2018, Amazon has moved to 1-day Prime delivery, expanded same-day delivery, and invested billions in Prime Video content on its streaming platform, he said. “Higher Prime and FBA prices could contribute $8 billion to $30 billion in revenue and $8 billion to $26 billion in Ebit annually, most of which is not in our estimates.”

Even without major price increases between 2021 and 2023, he said Amazon would benefit from $12 billion in AWS earnings before interest and taxes and $15 billion in incremental advertising ebit.

Write to Callum Keown at [email protected]

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