Amazon will benefit from a persistent surge in in-home buying as the novel coronavirus keeps people self-quarantined and unable to visit brick-and-mortar store locations, Bank of America told clients. Analyst Justin Post wrote in a note published Monday that between Amazon's announced hiring spree and outsized order volume that its stock should outperform the broader market over the next several months. "The key question for Amazon is if grocery and household item orders can offset the expected downturn in some discretionary item categories from an economic shock," Post wrote. "Amazon remains one of our top in-home stocks, and with increasing restrictions on movement, we anticipate a continued increase in goods ordered online vs. purchases in store." Post, who has a buy rating on Amazon's stock, sees the equity rising 46% to $2,480 over the next 12 months and recommends investors take confidence in the company's recently announced hiring surge. The Seattle-based e-commerce company said Monday that it is hiring an additional 100,000 employees in the U.S. to match a spike in online shopping amid the coronavirus outbreak. Amazon said that, through the end of April, it will raise pay for these employees by $2 per hour in the U.S., £2 per hour in the UK, and approximately €2 per hour in many EU countries. Amazon called on employees in other industries whose jobs were "lost or furloughed" as a result of the coronavirus to apply, a positive sign both for those without work and for Amazon's business in the first half of 2020, Post wrote. "We expect high-demand grocery and household goods categories to be lower gross margin for Amazon (vs items such as apparel and media), and employee costs will be higher, but the increase in headcount suggests that unit demand is tracking well above expectations, which should drive longer-term efficiencies," the analyst wrote. Post also noted stocks such as Netflix and Chewy could outperform as more and more U.S. employees are instructed to work from home and as others self-quarantine to protect against the spread of the virus.
