Amazon Could Be Prepping For Broader Same-Day Shipping: What This Means For The Retail Giant

Amazon.com, Inc. (NASDAQ: AMZN) could soon be launching a broader same-day shipping offering, according to an analyst at Morgan Stanley.

The Amazon Analyst: Analyst Brian Nowak has an Overweight rating and a $4,500 price target.

The Amazon Thesis: Amazon has recently moved its U.S. Prime Now and its 2-hour delivery into the Amazon app, with grocery becoming an increasingly important part of the Amazon story, analyst Nowak said in a note.

The company has already done similar integrations in India, Japan and Singapore, the analyst noted.

Coupled with the company's comments in the first-quarter earnings report that one-day shipping is seeing strong traction in Europe, has led Nowak to think Amazon seems to be prepping for an expanded same-day shipping offering.

According to the analyst, this same-day service is a mechanism to shift the e-commerce goal posts and raise consumer expectations, in turn driving market share.

Increased same-day expectations will raise the cost to compete in the e-commerce space and raise the value of Amazon's growing in-house delivery network, he added.

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The same-day offering, according to the analyst, will better address the critical and competitive nearly $1.7 trillion on-demand market.

Players like DoorDash Inc (NYSE: DASH) and Uber Technologies, Inc. (NASDAQ: UBER) are partnering with traditional retailers, and others with micro-fulfillment warehouse models, and some with both, posing a competitive threat to Amazon, the analyst said.

"These categories make up ~65% of the remaining offline core US consumer expenditure and will drive ~40% of forward US e-commerce growth," Nowak said.

If Amazon wants to maintain/grow its share of e-commerce, it will likely need to win this spend, he added.

Additionally, the extent to which Amazon modifies consumer expectations toward favoring same-day shipping will only increase the value of its logistics network, the analyst said. This will further open the door for the company to eventually launch its own third-party same-day logistics offering, he added.

Amazon Price Action: At last check, Amazon shares were down 0.77% at $3,208.99 Thursday at publication.

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(Photo: Amazon.com)