Amazon.com Inc. (AMZN, +1.42%) has been testing drones and using Kiva robots in order to expedite the distribution process and to reduce costs.
Over the past year, the shares of Amazon have managed to rise more than 42% but analysts think that there is more room for improvement with expectations that the company could boost its share price by an additional 19% over the next year.
To back up his forecast, Gene Munster, an analyst at PiperJaffray, went ahead to raise their price target on the e-commerce giant by $45 from $475 to $520 on Wednesday.
In recent trade, Amazon shares (AMZN, +1.30%) rose 1.1% to trade at $435.77 a share.
Munster went on to say that they strongly believe that Amazon has the potential to trade even higher and his outlook took into account that the cloud and e-commerce are still in their early stages of development. Munster also expects the e-commerce giant to represent 30 percent of all U.S retail sales opposed to the meager 7% which was reported in the first quarter.
Munster also commented that the introduction of Amazon’s same hour and same day delivery services are likely to unlock a much bigger market share for Amazon and that based on this, traders should view Amazon over a 5-year timeline.
The analyst’s bullish note came a day after Amazon announced that shipping of certain items below $10 will be free of charge to non-Prime members. The announcement is seen as a move aimed at outshining its big competitor, Wal-Mart Stores Inc. (WMT, +0.48%) which is also currently testing the free delivery service to its members.
The e-commerce giant has implemented a number of new changes to satisfy clients’ need for instant gratification. For instance, Amazon has been testing drones tasked with delivering small items directly to a client’s door and has also been working with Kiva robots in its distribution centers which are all aimed at expediting distribution.
Last month, Amazon released its Amazon Web Services enterprise cloud unit which raked in sales of $1.5 billion. Total sales soared 15% year-over-year to reach the $22.7 billion mark which contributed to the company narrowing its loss from $108 million to $57 million.
Added to this, Wall Street analysts are still positive on the company’s stock although they have been openly skeptical of Amazon’s potential to expand its margins and hence to turn a profit.
According to a poll by FactSet, about 40 analysts think that the average price target of Amazon is $465.71 while the average rating is overweight.
MT4 Chart: Amazon
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