From humble beginnings as an online bookstore, Amazon (AMZN) has evolved into one of the world’s biggest companies, with its remit spread across multiple sectors. However, Baird analyst Colin Sebastian says there is one particular branch of the Amazon ecosystem that is being overlooked.
“We believe Amazon B2B, over the very long term, has the potential to equal or surpass the size of the core B2C segment, and thus remains an underappreciated opportunity by many investors,” said the 5-star analyst.
On Monday, Amazon announced that its annualized B2B e-commerce volume had surpassed $25 billion, only approximately 2.5 years after the segment hit $10 billion. Four years ago, the B2B business generated just $1 billion.
“To put the $25 billion volume into greater perspective,” Sebastian said, “It took seven years for Amazon's consumer (B2C) e-commerce business to increase from $1 billion to $10 billion in annual volume, and another three years after that to reach $25 billion (so ten years total vs. five years for B2B).”
In what Sebastian estimates is a conservative growth forecast, by 2025, B2B volume will surpass $80 billion.
Currently, over five million businesses use Amazon B2B. 45 states and 90 of the 100 largest cities and counties count as customers and so do 80 of the Fortune 100 companies, up from 55 which used the service in 2018.
The TAM (total addressable market) is a huge one; The global B2B e-commerce market surpasses $7.6 trillion, according to Shopify.
“In our view,” Sebastian summed up, “Amazon should be able to leverage most of its B2C marketplace, logistics and transportation investments and infrastructure to support a much larger B2B opportunity.”
So, all good news for the e-commerce behemoth, but what does it mean for investors?
Sebastian rates Amazon shares an Outperform (i.e. Buy) along with a $4,000 price target. ~28% gains could be in the cards, should Sebastian’s forecast play out accordingly. (To watch Sebastian’s track record, click here)
The Street’s confidence in Amazon’s continued success is unanimous; All current ratings – 31, in total – are Buys, naturally resulting in a Strong Buy consensus rating. The average price target clocks in at $4,105.93, suggesting upside of 31% over the next 12 months. (See Amazon stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.