Amazon.com Inc. shares have sold off about 13% from their recent peak closing price. That makes for a “compelling” entry point, according to an Evercore analyst.
Evercore’s Mark Mahaney called Amazon’s stock
AMZN,
a “classic DHQ opportunity” for investors thinking long term, making reference to the idea of a dislocated high-quality stock.
Mahaney reiterated his upbeat view of Amazon in a note discussing the potential threat from Chinese marketplaces Shein and Temu that have seen exploding traction recently. The “competitive risk is real,” according to Mahaney, but it’s likely been “very overstated.”
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His recent survey work has shown that the threat from the Chinese marketplaces is “overstated and underappreciates some of Amazon’s enduring competitive advantages.” For one, Amazon looks to be in a good relative position as Shein and Temu gain ground, as the company “has among the lowest substitution risks” from those marketplaces of the U.S. online retailers he looked at.
Further, between 92% and 94% of U.S. online shoppers use Amazon “consistently,” so the platform seems sticky.
“The simple conclusion here is that we think Amazon has a highly sticky user base given its overwhelming lead in price, selection & convenience that at least makes the platform highly resilient in the face of changing competitive dynamics,” Mahaney wrote.
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Meanwhile, Shein and Temu tend to resonate with a younger, lower-income cohort of shoppers, while those using Amazon have higher average household incomes.
“Then there are Amazon’s enduring competitive advantages, which have been built though decades of innovation and execution,” he added. And Amazon has been bolstering its distribution speeds, in another competitive benefit for the company.
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