Amazon's 'robust' holiday sales spell earnings beat, 2018 expansion: Analyst

Key Points
  • GBH Insights recommends Amazon shares, citing optimism over the company's dominant e-commerce sales and tactical moves in 2018.
  • Its analyst predicts Amazon's Prime membership and online retailing will drive the stock 15 percent higher during the next 12 months.
  • Shares of Amazon are up 57 percent this year; shares closed up 0.5 percent Wednesday.
Jeff Bezos speaking at the new New York Economic Club luncheon in New York on Oct. 27, 2016.
Adam Jeffery | CNBC

Amazon's robust holiday sales bode well for a fourth-quarter beat and show the e-commerce giant's "significant momentum" heading into 2018, according to one Wall Street firm.

GBH Insights reiterated its "highly attractive" rating for Amazon shares, citing the growing success of the company's Prime membership platform.

"Our surveys continue to indicate that Prime membership remains the 'golden jewel' of the Bezos empire as our current estimate of 88 million Prime members has increased significantly (roughly 40 percent) year over year with the average Prime customer spending 22 percent more this holiday season than the year ago period," Daniel Ives, GBH Insights' head of technology research, wrote in a note to clients Wednesday.

Ives projects the company can beat the Street's fourth-quarter top-line estimate by 4 percent to 5 percent if his holiday sales estimates are accurate.

"With our estimates forecasting overall e-commerce growth rising roughly 18 percent year over year for holiday season and Amazon set to comprise roughly half of U.S. e-commerce holiday sales this year, it appears Amazon has significant momentum heading into 2018," Ives said.

The analyst maintained his $1,350 price target for Amazon shares, which is 15 percent higher than Tuesday's closing price. Amazon is one of the market's best-performing stocks this year. Its shares have rallied 57 percent through Tuesday versus the S&P 500's 20 percent gain.

Shares closed up 0.5 percent Wednesday.

Ives said he's looking for some more big moves from Amazon over the next year, including a possible pivot into health care and pharmaceuticals, a move several other analysts also predict.

"We believe organically Amazon can build out a pharmacy/prescription business through potential partnerships (e.g. Express Scripts or drug makers would make sense) as the company's Prime membership and distribution capabilities are a clear cross sell opportunity," Ives wrote. "We will be very surprised if Amazon does not put significant resources and efforts towards a move into pharmacy."

Such a tactical maneuver could pose a threat to existing drug retailers like CVS Health and Walgreens, with the former announcing plans earlier this month to acquire health insurer Aetna.