Wall Street isn't giving Amazon enough credit for its private label venture, which should grow to $25 billion in revenue by 2022, according to SunTrust Robinson Humphrey.
The flourishing private label business should be strong enough to help push the company's share price up more than 21 percent over the next 12 months, according to analyst Youssef Squali.
"As strong an e-commerce platform as Amazon has become over the last 20 years, we believe that the best has yet to come," Squali said in a note to clients Monday. "Private label is one of the highly under appreciated trends within Amazon, in our view, which over time should give the company a strong 'unfair' competitive advantage. 'Unfair' because it'll be very difficult to dislodge the company once it attains it; fair because it's earned, not bestowed."
The analyst increased his price target to $2,000 a share from $1,900, encouraging clients to buy the stock ahead of the expected growth.
Amazon's stock is up 42 percent this year, well ahead of the S&P 500's 2.7 percent climb. Shares rallied 1.45 percent Monday after the bullish note to clinch a closing high of $1,665.27.
Over the past few years, Amazon has been nurturing its private label offerings across a slew of product categories, including electronics, everyday use, apparel, home security and grocery with its acquisition of Whole Foods Market.
But it's also found success in selling casual clothing items, while brands like Nike and Calvin Klein are helping bolster its platform with popular merchandise.
Though small compared with some of the more established areas of Amazon's portfolio, the private label sales should generate $7.5 billion on Amazon's online marketplace in 2018, up 108 percent from SunTrust's previously published 2017 estimate of $3.6 billion, Squali said.
"According to Coresight Research, Amazon's private label brands are the fourth most bought clothing or footwear 'brand' on Amazon.com, with only Nike, Under Armour and Hanes ranking higher," he wrote. "We have chronicled roughly 70 private label launches/acquisitions over the past year alone, for a total of 100 or more currently. ... We believe Amazon is positioning itself within select categories including Electronics, Food, Apparel, all of which share a number of similarities including a very large total available market."