DBS Group analysts told investors in a note Monday that Amazon's (NASDAQ:AMZN) e-commerce is poised for market share growth and margin expansion.
The analysts, who have a Buy rating and $150 price target on the stock, stated, "AMZN's Retail segment (North America plus International) is expected to become a key driver of growth."
While they noted that the tech giant's retail segment is still attempting to figure out a way to return to its roots of profitability after challenges stemming from multiple macroeconomic factors over the past two years, they noted that the US e-commerce industry is expected to grow at a CAGR of 12.4% over FY23F-25F, and that AMZN is "still the leading e-commerce player accounting for 39% of the US e-commerce."
"Consensus expects revenue CAGR of 10% for the retail segment of AMZN over FY23F-25F, driven by growth in its online stores and third-party seller service. While retail EBITDA margins are projected to improve from 8% in 2023 to 12% in 2025, leading to 26% EBITDA CAGR," wrote the analysts.
"The focus will shift towards profitability as the retail segment completes its fulfilment build cycle. AMZN's flexibility in pushing 1P vs 3P inventory and its Prime offering both serve as major advantages in its retail business."
DBS expects AMZN's retail segment operating income to be a key driver of the company's share price from 2023 onwards, dethroning AWS's operating income.