Smartphone E-Commerce Can Boost Amazon’s Stock 10%

Amazon (NASDAQ:AMZN) is the largest online retailer in the U.S. It competes with companies like eBay (NASDAQ:EBAY), Wal-Mart (NYSE:WMT) and Best Buy (NYSE:BBY) in the consumer retail space.

We believe that growth in mobile e-commerce represents a major opportunity for pure online retailers like Amazon and eBay. Around 2% of online sales are generated through mobile phones, according to a recent study by Forrester Research. And mobile e-commerce is expected to generate 8.5% of all e-commerce revenues by 2015, according to Coda Research.

The main factors driving this growth will be sophisticated smartphone features such as mobile shopping apps and barcode scanners, along with increased usage of smartphones compared to PCs. We estimate that mobile e-commerce could create a 10% upside for the $119 Trefis Price estimate for Amazon’s stock.  Our analysis follows below.

Here are the main factors driving growth in mobile e-commerce:

1. Rapidly growing smartphone installed base

We expect the global smartphone installed based to increase from about 800 million smartphones in 2010 to over 2 billion by 2016. In comparison, we expect the worldwide PC installed (including notebooks, desktops and netbooks) to increase from about 1.3 billion in 2010 to around 2.5 billion in 2016. As smartphone penetration catches up to PC penetration, we expect a growing mix of e-commerce transactions emanating from smartphones.

2. Prevalence of smartphone shopping apps will enable more e-commerce transactions

Amazon and other major retailers are currently developing e-commerce applications for smartphones made by almost all mobile manufacturers. Shopping apps make it easier for users to conduct transactions on their smartphones. Another emerging function: Smartphone cameras will work as barcode scanners for goods. Once the smartphone scans the object to check the price, it can search the internet to find comparable prices at other retailers.

Impact to Amazon’s Stock Price

We estimate that 10% of total U.S. electronics and general merchandise (EGM) sales are now conducted online, up from around 6% in 2005, and we expect that this will reach 15% by the end of the Trefis forecast period.

However, smartphone-based e-commerce transactions could spell additional upside to our forecasts. If mobile e-commerce revenues account for 8.5% of all U.S. e-commerce revenues in 2015, as the Coda Research study suggests, then there could be slightly more than 9% upside to our original forecasts regarding the size of the online markets for Electronics & Merchandise as wells as Books, DVDs and Music.

For example, online EGM transactions could reach 16.4% of total EGM sales in the U.S. by 2015 instead of 15% as we currently forecast. You can modify our forecast below to see the impact on Amazon’s stock.

Furthermore, the additional upside attributable to smartphone-based e-commerce transactions would also impact our forecasts for online U.S. media sales (books, DVDs, music), international media sales, and international EGM sales. In aggregate, a 9% upside across all these markets that impact Amazon yields an upside of 10% to the $119 Trefis price estimate for Amazon’s stock.

You can see the complete $119 Trefis Price estimate for Amazon’s stock here.