Here’s What One Amazon Bull Took From the Annual Jeff Bezos Letter

Here’s What One Amazon Bull Took From the Annual Jeff Bezos Letter


This week’s release of Jeff Bezos’ annual letter to shareholders was a newsmaking event, what with the Amazon.com (ticker: AMZN) CEO challenging the company’s retail rivals to raise pay and putting eBay (EBAY) in the spotlight.

Shares of Amazon, recently about flat at $1,844.50, are up more than 20% in 2019.

 

Bullish analyst Anthony Chukumba of Loop Capitalon Friday reiterated a Buy rating on the stock, as well as a $2,200 price target that is about 19% higher than current levels and above FactSet’s $2,128 analyst average. He cited three key items from Bezos’ letter:

• Third-party merchandise. Since 1999, Bezos wrote, “third-party sales have grown from 3% of the total to 58%. To put it bluntly: Third-party sellers are kicking our first-party butt. Badly.”

 

“We believe Mr. Bezos’s commentary is consistent with Amazon’s strategy of shifting gross merchandise sales from first-party (i.e., the company stocking and selling products itself) to third-party sales, as the latter generates much higher profit margins and returns and limits the company’s inventory risk,” Chukumba said.

Bezos’ commentary ended up pulling down shares of eBay yesterday. Digital craft marketplace Etsy (ETSY) also slipped a bit but less dramatically—which makes sense, since the company is less of a direct Amazon competitor. Read more




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