Amazon's Black Friday Focus and Retail Sector Momentum
Amazon has shifted its focus from Cyber Monday to Black Friday for the second consecutive year, a strategic move that has yielded positive results, according to Gene Munster of Deepwater Asset Management. This aligns with Amazon's tradition of creating its own sales events, such as Prime Day.
The retail sector is experiencing positive momentum, with sales growth accelerating over the past eight quarters. Paid units have increased from 8% in December 2022 to 12% in September. Retail profitability is also improving, with Amazon's estimated retail operating margin rising from a negative 3% two years ago to a positive 5% in the latest quarter.
Munster notes that potential changes to tariffs, especially the rule on import duty for products valued over $800, could negatively impact Amazon. However, he suggests that further improvements in retail profitability to 7% in 2025 could significantly boost earnings per share to $7.15, compared to current expectations of $6.15.
The shift to Black Friday comes amidst a frenzied shopping season, with retailers across the U.S. and Europe offering deals to attract bargain hunters. Stores opened as early as 5 a.m. following Thanksgiving, despite a shortened shopping season. This strategic timing is crucial as the holiday shopping season has been reshaped, with consumers making purchases earlier due to ongoing discounts.
The Black Friday to Cyber Monday period is expected to break sales records, with U.S. retail sales projected to reach $75 billion, marking a 5% year-over-year growth. This underscores the importance of this key shopping period for retailers.
Amazon stock closed at $207.89 on Friday, up by 1.05%. Year-to-date, Amazon's shares have gained nearly 39%. The consensus analyst rating on the Amazon stock is currently "Buy," with a price target of $238.16, indicating an upside potential of 14.6%.