Morgan Stanley’s top analyst, Brian Nowak, believes that Amazon’s (AMZN) grocery expansion plans could pose a challenge to its peers as it seeks to capture a larger share of the multi-trillion-dollar online grocery market. The e-commerce giant announced that it is making same-day fresh food delivery available in more than 1,000 U.S. cities and towns, with plans to expand this to at least 2,300 locations by the end of the year. Shares of competitors Instacart (CART), Walmart (WMT), Kroger (KR), and Albertsons (ACI) fell in response to the news yesterday.
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Nowak maintained his “Buy” rating on AMZN stock, with a Street-high price target of $300, implying 33.6% upside potential from current levels. Nowak is a five-star analyst on TipRanks, ranking #615 out of the 9,948 analysts tracked. He boasts a 62% success rate and an average return per rating of 7.70%.
Here’s Why the Analyst Is Bullish About Amazon
Nowak highlighted that Amazon’s move to expand its grocery selection on Amazon.com will effectively lower its delivery costs and minimum basket size. The analyst added that the company is aiming to capture a larger share of the $1.5 trillion offline grocery market.
According to Nowak, Amazon had been losing a “modest” share of the online grocery market to peers like Walmart, DoorDash (DASH), and Uber (UBER) due to factors such as price, selection, convenience, delivery, and pick-up options. However, Amazon’s push to expand its grocery market online and lowering prices shows a stronger commitment to investing for the long-term and faster growth.
Furthermore, Nowak believes that the extent to which Amazon increases competition could threaten the growth or profitability potential of its peers. Among its rivals, Nowak noted that Walmart has the “most demonstrable track record of share gains and that it has been preparing for this risk over the last decade.” In recent years, Amazon has been actively changing its grocery strategy by making changes to its Fresh grocery store chain and opening fresh food delivery to non-Prime members.
Is AMZN Stock a Good Buy?
Wall Street remains highly optimistic about Amazon’s long-term stock outlook. On TipRanks, AMZN stock has a Strong Buy consensus rating based on 44 Buys and one Hold rating. The average Amazon price target of $264.68 implies 17.9% upside potential from current levels. Year-to-date, AMZN stock has gained 2.4%.
