Amazon.com Inc. (AMZN) shares have recently experienced a 13% decline from their peak closing price. This dip, however, presents what Evercore analyst Mark Mahaney describes as a “compelling” entry point for investors with a long-term outlook. Mahaney refers to Amazon as a “classic DHQ opportunity,” underscoring the potential of investing in a dislocated high-quality stock.
In a note analyzing the potential threat posed by Chinese marketplaces Shein and Temu, Mahaney reiterates his positive stance on Amazon. While acknowledging the existence of competitive risk, he believes that this risk has been greatly exaggerated. Mahaney’s recent survey work has shown that the threat from Chinese marketplaces is “overstated and underappreciates some of Amazon’s enduring competitive advantages.”
Mahaney highlights that Amazon is well-positioned relative to its competitors in the face of the growing influence of Shein and Temu. His research reveals that Amazon has among the lowest substitution risks of all U.S. online retailers he examined. Additionally, a significant majority (92-94%) of U.S. online shoppers consistently rely on Amazon, establishing the platform’s stickiness.
In conclusion, Mahaney emphasizes that Amazon’s overwhelmingly dominant position in price, selection, and convenience ensures a highly resilient user base amidst changing competitive dynamics. Moreover, Shein and Temu predominantly attract younger, lower-income shoppers, while Amazon’s user base consists of individuals with higher average household incomes.
Amazon’s enduring competitive advantages, fostered through decades of innovative and strategic execution, further solidify its position in the market. The company’s continuous efforts to enhance distribution speeds provide an additional competitive edge.
As such, despite short-term fluctuations in Amazon’s stock price, this recent dip offers a compelling opportunity for long-term investors to capitalize on the resilient growth potential of the company.
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