Amazon – Trefis Price Estimate Raised as Shoppers Move Online

Amazon (NASDAQ:AMZN) is an online retailer that sells a variety of books, music, electronics, and apparel across North America, Europe, and Asia. The company primarily competes with other online retailers like eBay (NASDAQ:EBAY) in addition to traditional brick and mortar players like Wal-Mart (NYSE:WMT), Best Buy (NYSE:BBY) and Costco (NASDAQ:COST).

Amazon’s stock has climbed from the lows of $38 in 2008 to $185 today. Based on the strong on-going shift towards online retail spending and Amazon’s growing share in merchandise outside of its traditional books and media business, we have raised our estimate for Amazon stock substantially from $107 to $182, putting our number in line with market price. We estimate that 68% of Amazon’s stock value is generated by electronics and general merchandise sales. Below we highlight a few key trends for Amazon in detail.

Shift to Online Retail Spending

Amazon benefits from 1) a shift towards more retail spending occurring online and 2) growing retail market share among online retailers. We now expect that nearly 26% of retail spending on electronics and general merchandise in the US will occur online by the end of our forecast period, which is up from 16% estimated earlier.

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The shift towards online spending not only benefits pure online retailers like Amazon and eBay, but also more traditional retailers like Wal-Mart, Best Buy and Costco, who have stepped up their efforts in order to boost their online business.

Similarly, we now expect that about 14% of international retail spending on electronics and general merchandise will occur online by the end of our forecast period, which is up from 8% estimated earlier.

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Rising Amazon Share in Electronics & General Merchandise Market

We forecast that Amazon’s US online EGM share will increase from just under 8% in 2011 to nearly 14% by the end of our forecast period. Previously, we had expected lower share for Amazon in this market with share reaching around 10% by the end of our forecast period.

Since the online US EGM market is very large (around $150 billion expected in 2010), small differences in share have a large impact on valuation.

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Drag the trend-lines in the charts above to see the impact of your own forecasts on Amazon’s stock value, and let us know your perspective on these key metrics by providing feedback in the comment box below.

You can see the complete $182 Trefis Price estimate for Amazon stock here.