Amazon could surge 20 percent this year as opportunities are 'mostly unconstrained,' analyst says

  • Amazon shares could increase more than 20 percent this year, according to a new note from Pivotal Research Group.
  • The research firm initiated coverage of Amazon with a buy rating and $1,920 price target for the end 2019 citing strength across its retail, digital ad and AWS businesses.
  • Risks to Amazon include regulation and a slowdown in global growth, the firm said.

Amazon is set for a bull run in 2019 as shares could surge more than 20 percent, according to a new report from Pivotal Research Group.

In a research note published Monday, analyst Brian Wieser initiated coverage of Amazon with a $1,920 price target for the end of the year, roughly 21 above the stock's current level. That price would put company's valuation close to $1 trillion.

Amazon's stock is currently priced at $1,575 and has a market valuation of $770.3 billion.

"Despite its current massive size, we see Amazon's opportunities as mostly unconstrained based on a successful track record of capitalizing on consumer and IT department spending," Wieser wrote.

The analyst said Amazon will continue to take a bigger slice of global consumer spending, which totalled $45 trillion in 2018, according to Euromonitor. Wieser said platforms like Amazon will increasingly rely on physical store locations in the same way that traditional retailers like Walmart and Target are turning to digital platforms.

"Amazon will be increasingly indifferent as to whether or not a sale is fulfulled in part or in whole online or at a store," he wrote.

The research firm estimates Amazon's digital advertising business will continue to be a source of revenue growth after accelerating more than 70 percent in 2018. Amazon took third place in U.S. digital ad sales in 2018, behind Google and Facebook, according to market research company e-Marketer.

Pivotal is not the only firm that is bullish on Amazon this year. Nearly all analysts polled by Reuters have a buy rating on the stock, with an average price target implying a 35 percent increase from current levels.

Key risks to Amazon this year include regulation, competition and a global economic slowdown, Wieser wrote.

"While AWS probably holds up well because of the secular growth trends it is driving and the long-term contracts it has with many of its customers, the retail business might face risks because of the relative maturity of e-commerce and likelihood that consumer spending trends would probably negatively impact the company in a way they didn't during the last recession," the note said.

Amazon rose 28 percent in 2018, outperforming other tech stocks including Facebook, Apple and Alphabet.