Gavin Baker, Portfolio Manager at Fidelity Management & Research Company, is forecasting that e-commerce is likely to triple or even quadruple over the next 50 years, and Amazon.com, Inc. (AMZN) is set to benefit.
“Looking at e-commerce, each year e-commerce comprises 10% of total retail sales, but 40% of incremental sales,” Baker said. “This is likely to be very positive for e-commerce companies with sustainable competitive advantages.”
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Amazon.com is one of these companies that has a competitive advantage, Baker says, due to the company’s immense incremental sales and scale advantage.
“They have less than 10% of total e-commerce sales, but they have more than 100% of incremental e-commerce sales, so they are taking share within e-commerce and from their direct e-commerce competitors in the United States. They are 20 times larger than the number-two player,” Baker said.
Baker also points to other statistical tailwinds he sees behind his fundamental analysis on Amazon.com.
“Amazon is optically expensive. They have total control over their margins. Jeff Bezos runs it with a very long-time horizon. So investors should look at the valuation through a normalized margin basis…I think it’s very clear that on that math that it’s not expensive, but it does have very good price momentum,” Baker said.
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