Amazon will soar more than 20% as it becomes a 'third force' in advertising behind Google and Facebook, analyst says

Brent Lewis/The Denver Post via Getty ImagesFounder of space company Blue Origin, Jeff Bezos, speaks about the future of commercial space travel during the 32nd Space Symposium on April 12, 2016 in Colorado Springs, Colorado.
  • Amazon is set to soar over 20% by the end of the year, according to a new report from Pivotal Research.
  • Analyst Brian Wieser told clients that despite Amazon’s already-massive size, it has promising growth potential, primarily in advertising.
  • Still, Wieser’s $US1,920 price target on the stock comes in below its record high of $US2,050.50.
  • Watch Amazon trade live.

Amazon– one of the world’s largest retailers – is big, but it’s not nearly done expanding, according to an analyst who sees the stock surging this year.

“Despite its current massive size, we see Amazon’s opportunities as mostly unconstrained based on a successful track record of capitalising on consumer and IT department spending,” Brian Wieser, senior analyst at Pivotal Research, said in a note to clients late Sunday.

Wieser, known for correctly forecasting troubles for Snap and Facebook, initiated the firm’s coverage on the stock with a “buy” rating and a year-end price target of $US1,920, implying a rally of about 22% from Friday’s closing price of $US1,575.39.

Amazon is particularly well-positioned in its advertising business, which is growing faster than any other revenue stream, according to Wieser. The e-commerce giant generated an estimated $US9 billion in advertising revenue in 2018, Weiser said, the bulk of which ran in the US.

“At around 10% of the global total in 2023, Amazon will easily be the ‘third force’ in digital advertising after Google and Facebook, although it will still be substantially smaller than the $US215bn in annual revenue we expect Google to generate or the $US59bn we expect to see from Facebook.”

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Notably, the analyst said brick-and-mortar stores are becoming increasingly important to Amazon.

“Platforms such as Amazon are likely to increasingly rely on physical locations as much as traditional retailers such as Walmart and Target will increasingly rely on their digital platforms to sell products and provide customers with related information.”

Other analysts think Amazon might need to bolster its physical presence to succeed in the long run. Gene Munster, a widely followed tech analyst at Loup Ventures, told Business Insider last month that Amazon acquiring Target makes sense for just that reason.

Wieser’s target is far from the most optimistic on Wall Street – the highest target among analysts surveyed by Bloomberg is $US2,450, from D.A. Davidson – and his target suggests the stock won’t recapture its September all-time high of $US2,050.50.

Still, his view is in line with the vast majority of Wall Street. Of analysts surveyed by Bloomberg, 94% rate Amazon a “buy,” 4% carry a “hold” rating, and 2% rate the stock a “sell.”

Risks to Wieser’s bull case include threats related to regulation, competition, and “general economic trends.”

Amazon was up about 2% in early Monday.

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