UBS raised its price target on Amazon to $1,200 from $1,100 Monday, but also described a bullish scenario that could take the shares 60 percent higher from here and rival Apple in size in just 12 months.
UBS analyst Eric Sheridan noted that his $1,600 "upside" scenario is primarily based on Amazon growing North American and international sales by more than he and Wall Street expects.
"Such upside could be driven by: 1) better than expected sales stemming from Prime subscriber growth; 2) success in new geographies and new product verticals within its eCommerce competency; 3) better than expected overall retail sales; and/or 4) little to no long-term headwinds stemming from hardware/software/service sales from competitors such as Apple and Google," Sheridan said in an investors note.
Amazon shares closed at $1001.81 on Friday, up 34 percent for the year. It was 1 percent higher in early trading Monday.
The online retailer has had an impressive year announcing its $14.7 billion purchase of Whole Foods last month in its latest venture into the grocery industry. During its annual Prime Day last week, Amazon sales broke records, growing over 60 percent from 2016 and adding more new Prime members than on any other day in the company's history.
UBS bullishness is about CEO Jeff Bezos' leveraging four "long-tailed opportunities" in Prime, third-party sellers, advertising and Amazon Web Services.
"Amazon's acquisition of Whole Foods is one of the most recent examples underlining the company's ambitions to drive greater wallet share among current Prime members," wrote Sheridan. "Based on our last UBS Evidence Lab survey among 2,500 US consumers, 75% of respondents stated that they had never shopped for groceries on Amazon before, followed by household products (65%), personal care products (52%) and pet supplies (51%)."
Sheridan's $1,200 base-case price target for Amazon would represent a 20 percent rise over the next 12 months, bringing its market value to about $574 billion. The more aggressive $1,600 scenario would place Amazon's market value at $764.8 billion. Apple's current market capitalization is $777.1 billion.
Amazon to rival Apple?
Currently, the analyst sees North America sales increasing by 21.9 percent and international sales rising by 16.4 percent in 2017. But Sheridan believes those growth rates could actually come in at 25.9 percent and 20.4 percent respectively, justifying the upside scenario.