Amazon stock is a Buy, says Roth

Roth Capital Partners analyst Rohit Kulkarni gave a Prime Day checkup on Amazon (Amazon Stock Quote, Charts, News, Analysts, Financials NASDAQ:AMZN) on Wednesday and maintained a “Buy” rating on the stock. Kulkarni said Prime Day sales look to have been better than expected, which should bode well for the second half of the year.

Amazon reported last week that the first day of Prime Day was the single-largest sales day ever on its e-commerce platform, with over 375 million items worldwide being purchase by Prime members.

“The first day of Prime Day was the largest sales day in Amazon’s history, and Prime members saved more this year than any other Prime Day event,” said Doug Herrington, CEO of Amazon Stores, in a statement. 

“Prime is an incredible value, and we’re proud to offer additional value for members through exclusive deals events like Prime Day. Thank you to our Prime members for continuing to shop in our store, and to our employees and independent sellers around the world who delivered for customers this Prime Day,” he said.

Last week, Roth Capital hosted two conference calls with Amazon-focused third-party sellers and ad agencies, where the discussion focused on Prime Day trends, Fulfillment By Amazon (FBA) pricing changes, Buy with Prime and Amazon’s programmatic advertising on its demand-side platform (DSP).

Kulkarni said all of the speakers spoke of softness in business over the first half of the year, a trend which has reversed over the past six weeks. Speakers said Prime Day beat clients’ expectations and that, overall, they kept a positive second-half outlook. Kulkarni estimated Prime Days sales in the Q3 of $6.3 billion and about $9.5 billion-$10.0 billion in total merchandise sales, implying about a 20 per cent year-over-year growth rate.

“All in, we believe Prime Day sales were better than expected while ad spend on Amazon has stayed above the industry trendline,” Kulkarni said.

 Speakers were also positive on Amazon DSP and Video as two growth areas in advertising, with many implying that Sponsored Products remains the holy grail of advertising on Amazon.

“The speakers don’t believe there will be any radical change with Amazon’s decision to regionalize fulfillment locations. But, brands now have to manage inventory based on total sales, as there is no way of knowing if your product is out of stock in a particular region,” Kulkarni said.

The analyst reiterated a 12-month target price on AMZN of $155, which at the time of publication represented a projected return of 17 per cent.