Shares of Amazon hit record highs last week and some analysts think the growth won't stop for the foreseeable future.
The Seattle tech giant has emerged as one of the few companies that could potentially come out of the COVID-19 crisis stronger than ever.
Brett Thill, an analyst with Jefferies, said he sees a path toward $4,000 for Amazon's stock, which was trading at $2,328/share on Tuesday, already up more than 50% from mid-March.
Jefferies on Tuesday increased its 12-month price target for the stock to $2,800. Thill also said Amazon's valuation could reach $2 trillion by 2023; the company hit the $1 trillion milestone in September.
The global pandemic has put a spotlight on the Seattle tech giant as millions rely on the company for everything from grocery delivery to cloud computing.
Jefferies ran a recent survey of U.S. consumers and found that Amazon was the only e-commerce retailer seeing a step up in customer spend from the outbreak.
"This confirms our belief that Amazon will benefit from COVID-19," Thill wrote in a research note.
The primary reason consumers are buying more from Amazon is to avoid physical stores, the survey showed. Shelter-in-place orders and uncertainty about the safety of brick-and-mortar locations are giving Amazon's an advantage over competitors.
The coronavirus pandemic will likely force department store chains to shut down, The New York Times reported, leaving more market share for Amazon to grab.
Retail store traffic fell a whopping 98% last week in the U.S. What's that leftover 2% you ask? Your trips to the grocery store and Target.
— Jordyn Holman (@JordynJournals) April 21, 2020
Amazon has likely signed up millions of new Prime members over the past month who are using trial versions of the $119/year program. Prime members end up spending about double on Amazon compared to non-members, research has shown. "We think that many who are experiencing for the first time the value, ease, and convenience of the service will decide to keep it, thus boosting Amazon's future growth," Thill wrote.
Thill described the company's Amazon Web Services and Amazon Advertising businesses as "underappreciated." AWS itself could be worth nearly $1 trillion in three years, he wrote.
Others are also bullish on Amazon's growth. A report from RBC Capital Markets earlier this month projected that Amazon's online grocery business, which has increased due to COVID-19, could produce $70 billion in gross merchandise volume by 2023, up more than 3X from 2019.
Increased online grocery purchasing via Amazon is also worth watching given that the category represents less than 5% of Amazon's total retail sales, Jefferies noted.
Amazon reports first quarter earnings next week. While its revenue will surely increase year-over-year, investors will be watching the company's expenses. In his letter to shareholders last week, Amazon CEO Jeff Bezos said the company is spending more than $500 million through the end of April on hiring an additional 175,000 employees to help meet demand caused by the pandemic. "While we recognize this is expensive, we believe it's the right thing to do under the circumstances," he wrote in the letter.
The Jefferies report called out potential risks of regulatory scrutiny, but it does not expect material impact on the stock over the next two years. Criticism of Big Tech, which had increased in recent years, could subside due to reliance on the giants during the COVID-19 crisis. Former Google CEO Eric Schmidt said last week that Americans should be "a little bit grateful" for the companies.
Microsoft, Apple, Amazon, Alphabet, and Facebook now account for more than 20% of the market cap of the S&P 500 index, Reuters reported.
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