Amazon’s stock clinches highest close in more than a year

UBS analyst Lloyd Walmsley weighed in positively on Amazon’s e-commerce business Sunday, writing that he saw a path for the company to realize double-digit North America retail margins over time, and to hit 8% or 9% in 2025. For context, the consensus view currently calls for 5.4% North America retail margins in 2025.

While Walmsley kept his buy rating and $175 price target on Amazon shares unchanged, he’s encouraged by recent developments, including an enhanced arrangement with Shopify Inc.
SHOP,
+2.46%
and new fees for its Seller Fulfilled Prime program.

Read: Here’s Amazon’s path to a $200 stock price, according to one bull

“We see this agreement with Shopify, as well as the reinstatement of the Seller Fulfilled Prime (SFP) program, as a win/win and signs that AMZN [has] started ramping strategies to externalize and monetize Prime off-platform,” Walmsley wrote.

While the specifics of the Shopify deal are unknown, Walmsley thinks Amazon has made a smart long-term move.

“Trade press around the deal suggested Amazon highly wanted the deal, sought to ensure purchase metrics through [Buy with Prime] were shown in the Shopify dashboard, and did most of the integration work itself, suggesting they may not get any of the payment revenue stream from Shopify for now,” Walmsley said.

“But regardless, we see this as a potential revenue stream for Amazon over time,” he continued. “To the extent that merchants opt into Buy with Prime and users convert higher with Buy with Prime, over time this gives Amazon potential for significant leverage in future negotiations on the partnership.”

See also: Why Amazon is this analyst’s top internet stock pick

Amazon shares have gained 70% so far this year, as the S&P 500
SPX
has advanced 17%.