Expect Amazon's 'Flywheel' Approach To Continue Adding To Long-Term Upside

Analysts at Wells Fargo believe that artificial intelligence and other next generation technologies will support Amazon.com, Inc. (NASDAQ: AMZN)'s stock. The firm's Ken Sena resumes coverage of Amazon's stock with an Outperform rating and $1,400 price target.

Amazon continues to make use of artificial intelligence applications to enhance the user experience, offer compelling recommendation lists, shorten delivery times, shrink product cycles, and expand its customer support, Sena commented in his research report. At the same time, Amazon is also using artificial intelligence technologies to improve its AWS cloud segment's leadership and also help "pave a growing number of paths" for the company to enter new industries.

For example, the apparel, over-the-counter medicine (excluding pharmaceutical drugs) and grocery space combine for a $130 billion total addressable market, the analyst highlighted. In addition, the pharmaceutical drug segment offers Amazon another $450 billion in incremental total addressable market in the U.S. Encouragingly, 23 percent of this market is already conducted through "mail order."

"We see Amazon's famous flywheel as spinning with increasingly impenetrable force, where customer experience, frequency, and data will only grow," Sena wrote. "We see this lead in data, coupled with the company's edge in compute efficiency, as increasingly feeding insights into supply chain, for its retail, video, and other efforts, and through AWS, for its partners."

Bottom line, Amazon is well positioned to accelerate its growth and the analyst is expecting a sustainable 20 percent revenue growth rate through at least 2021.

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Image Credit: By Unknown - AWS, Public Domain, via Wikimedia Commons