There are new ecommerce platforms on the rise, and they appear to be giving Amazon (NASDAQ:AMZN) investors the heebee-jeebees.
The Chinese-founded global fast-fashion ecommerce platform Shein and ecommerce marketplace Temu, the brainchild of PDD (PinDuoDuo’s parent company), have been gaining traction with reports and 3rd party tracking services noting extremely robust growth for both platforms in the U.S.
Evercore’s Mark Mahaney, a 5-star analyst rated in the top 2% of the Street’s stock pros, says the “competitive risk is real,” but as far as Amazon is concerned, he thinks it is probably not as serious as some might think. “We believe the Temu/Shein risk is overstated and underappreciates some of Amazon’s enduring competitive advantages,” Mahaney opined.
So, why is that, then? Well, for starters, Mahaney’s cross-visitation analysis shows that amongst U.S. online retailers, Amazon has some of the “lowest substitution risks” from Temu and Shein. In terms of potential substitution, it takes 15th place amongst the 20 most prominent online retail platforms, and 17th place vs. Temu.
Based on survey work, it also appears that Amazon elicits “extremely consistent & sticky” behavior from U.S. Online shoppers with 92% to 94% regularly making use of the platform.
Lastly, Shein and Temu’s biggest customer base differs from the one using Amazon. These platforms appeal to a younger demographic, one that generally has less income. The average Amazon shopper has a household income of $78,000, compared to $68,000 for Temu and $65,000 for Shein.
“Then there are Amazon’s enduring competitive advantages,” notes Mahaney, “which have been built though decades of innovation and execution and are based on Price, Selection & Convenience, a very loyal Prime customer base, and most recently, an accelerating speed delivery network.”
In fact, not only does Mahaney make the case Amazon is not at much risk from these up-and-coming platforms, but that investors can make good use of the recent share price decline. “We believe the recent correction in AMZN shares – driven by a number of macro, market & company specific factors – creates a compelling entry/adding opportunity for AMZN investors,” Mahaney said.
As such, Mahaney reiterated an Outperform (i.e., Buy) rating, backed by a $190 price target. Should the figure be met, investors will be sitting on returns of ~47% a year from now. (To watch Mahaney’s track record, click here)
Almost everyone on Wall Street agrees with that thesis. Barring one fence sitter, all 40 other recent reviews are positive, naturally making the consensus view here a Strong Buy. Over the next 12 months, shares are expected to post growth of ~36%, considering the average target stands at $176.02. (See Amazon stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
