Amazon shares have jumped 20 percent in the first six weeks of 2015, and there's good reason to believe the stock has more room to run, Morningstar analyst R.J. Hottovy told CNBC on Wednesday.
In fact, shares could reach $400 if Hottovy's fair value estimate on Amazon's stock price comes to fruition. What's behind the potential upside? Hottovy highlighted three big reasons.
First, without the cost burden of physical stores, Amazon can still charge less than brick-and-mortar retailers. And there's been a shift among consumers to prefer expediency over price now that retailers have been trying to match Amazon prices, Hottovy said on CNBC's "Tech Bet."
"That puts them at a very strong competitive advantage across an even wider number of products than any other traditional retailer can match," Hottovy said.
Second, preferred subscription service Amazon Prime has helped increase operating margins, and Hottovy expects its estimated 35 million members to grow.
"There's a psychological aspect to Amazon Prime, where as once you've locked in to that membership fee for the year, you feel compelled to use it and keep within Amazon's ecosystem," Hottovy said.