Amazon (NASDAQ:AMZN) keeps finding fresh opportunities to grow its all-encompassing business, and its latest is literally just that. So says Morgan Stanley analyst Brian Nowak when weighing up the company’s push into the huge fresh grocery market, a move that can unlock “durably faster growth.”
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Nowak estimates that total US spending on food and beverage consumed off-premises (grocery and CPG) will reach about $1.6 trillion in 2026. Roughly $600 billion, or around 40%, of that will come from fresh and perishable items. To put that in perspective, this fresh/perishables market alone is nearly the size of Amazon’s projected 2026 US GMV of roughly $570 billion. So, success in this category could “drive material growth” on top of Amazon.com’s current $50 billion-plus US grocery business, which so far has not included fresh or perishable products. Every 1% share of the US fresh/perishables market – about $6 billion – would translate to roughly 120 basis points of incremental GMV growth to Nowak’s 2026 estimates.
Looking further ahead, Nowak thinks that gaining deeper insights into consumer behavior and brand preferences within grocery will be central to Amazon’s ability to develop “next generation agentic grocery offerings.”
And standing in the ecommerce giant’s stead is the fact that grocery infrastructure is largely built. Delivering items as varied as vegetables, ice cream, meat, and even golf balls in the same order is a logistical challenge. Yet, Nowak believes Amazon has been gearing up for its 2,300-city fresh and perishables rollout by retrofitting existing fulfillment and delivery stations with cold storage and building new facilities equipped for this purpose. In some markets, Nowak thinks the company is also ready to tap into its physical store footprint to support the effort.
“Bottom line,” the 5-star analyst went on to add, “we view this offering (in particular with the $25 minimum basket size) as a way for AMZN to drive higher utilization and purchase volume on its already leading logistics network and fleet.”
While some investors have raised concerns that the logistical complexities of grocery could weigh on Amazon Retail margins, Nowak cites three reasons why these worries are misplaced. First, the $25 minimum basket size for free delivery remains in place, which effectively sets a floor for gross profit dollars per order. Second, the analyst pointed to “Retailing 101”: fresh and perishable “top-offs” typically drive larger basket sizes and higher gross profit dollars per order. Amazon is already promoting fresh and perishable “end cap checkout” sales to reinforce this. Finally, while ASPs (average selling prices) in fresh and perishables are lower, the analyst believes merchandise margins in this category rank toward the higher end of Amazon’s retail mix, helping provide a “buffer to incremental gross profit to the orders.”
To this end, Nowak assigns Amazon shares an Overweight (i.e., Buy) rating and a $300 price target. Should the figure be met, investors will be pocketing returns of 30% a year from now. (To watch Nowak’s track record, click here)
Barring one skeptic, all of Nowak’s colleagues agree with that stance; based on a mix of 45 Buys vs. 1 Hold, the stock claims a Strong Buy consensus rating. Going by the $264.14 average target, a year from now, shares will be changing hands for a ~15% premium. (See AMZN stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.