Investing.com – Amazon (NASDAQ:AMZN) climbed on Tuesday, sidestepping the broader market selloff, after RBC suggested the e-commerce giant's launch of its Prime One-Day Shipping program over the next year could trigger a surge in its share price.
RBC raised its price target on Amazon to $2,600 a share from $2,250 a share, indicating potential gain of 46% from Friday's closing price of $1,776.29. Amazon.com (NASDAQ:AMZN) shares were up 0.9% to nearly $1,792.
"We believe AMZN may well generate accelerating revenue (and) unit growth for some time as One-Day goes nationwide (and) worldwide," RBC analyst Mark Mahaney said in a note to investors Sunday.
Amazon's rollout of its one-day shipping program is expected to not only drive subscriptions of Amazon Prime, but boost spending per household using Prime, boosting Amazon’s total revenue by 7% to 15%, RBC said.
"Our 7-year survey on Online Retail indicates that a very high and rising 64% of U.S. internet users are 'Extremely' or 'very interested' in next-day shipping," Mahaney wrote. "(Amazon (NASDAQ:AMZN)) is tapping into real demand here. Makes One-Day a true (growth curve initiative)."
Amazon is expected to complete its rollout of One-day Prime across the U.S. which the e-commerce giant began rolling out June, within one year, and globally within two to three years, according to RBC.
Amazon has seen early signs of success with its one-day shipping program as North American retail revenue gained momentum in the second quarter.
Investment to ramp up the rollout of the delivery service may cause short-term pain as margins get compressed. But longer term, Prime may become more widely adopted.
"One-Day will make Prime more appealing for consumers, which will make (Fulfilled By Amazon (NASDAQ:AMZN)) more appealing for vendors, which will increase supply on Prime, which will make Prime more appealing for consumers," Mahaney said.