Shares of Amazon.com Inc. (AMZN) reached their highest closing price since August 16, 2022, closing at $143.10 on Monday, up 3.5% for the day. The stock's upward momentum reflects growing enthusiasm for the potential improvement in the financial performance of Amazon's retail business.
UBS analyst Lloyd Walmsley expressed optimism about Amazon's e-commerce business, stating that he sees a path for the company to achieve double-digit North America retail margins in the future, with expectations of reaching 8% or 9% by 2025. Currently, market consensus predicts North America retail margins of 5.4% in 2025.
This positive outlook is fueled by recent developments, including an enhanced agreement with Shopify Inc. (SHOP) and the introduction of new fees for Amazon's Seller Fulfilled Prime program. Walmsley believes these strategic moves will allow Amazon to externalize and monetize their Prime services beyond their platform.
Although the specifics of the Shopify deal are undisclosed, Walmsley believes it is a wise long-term decision for Amazon. While Amazon may not receive any payment revenue from Shopify initially, merchants opting into the Buy with Prime feature could provide Amazon with a potential revenue stream.
Amazon shares have experienced a 70% increase year-to-date, outperforming the broader market's 17% advance as represented by the S&P 500 (SPX). This performance solidifies Amazon as one of the top internet stock picks, according to analysts.