‘Amazon may be a victim of its own success’: Amplify ETFs CEO

Amplify ETFs CEO, Christian Magoon, joined Yahoo Finance Live to break down to discuss the outlook of Amazon as Prime Day begins.

Video transcript

JULIA LA ROCHE: Thanks, Adam. Another stock we're watching, of course, is Amazon since it's Amazon Prime Day, but really, Prime Days these days, right? And our next guest is Christian Magoon, Amplify ETFs CEO, to break this down for us. Christian, great to have you on the program. And of course, we know Amazon Prime Day, it just gets bigger and bigger every year. What's kind of your outlook for this year?

CHRISTIAN MAGOON: Yeah, well, we see continued growth. Last year was held during a pandemic, which should have benefited Amazon. And it did. They eclipsed $10 billion in sales. But believe it or not, a year later, at least about nine months later since Prime Day was held in the fall, we see 25% more Amazon Prime members today, around 150 million of them. So Amazon should set a new record possibly to $11 to $12 billion in sales this Prime Day, which is really helpful for them. They need a shot in the arm. Certainly, the stock has been underperforming the S&P over the last year. And I think this could be some positive news for Amazon to continue its rally towards that $4,000 mark.

ADAM SHAPIRO: I love hearing that $4,000 mark, but I think a lot of us and a lot of investors are questioning with the transitions that are coming up with Amazon, the fact that yes, they've got 40% of the US e-commerce market, but e-commerce only represents 15% of total retail. After the pandemic, shouldn't it be much higher than that?

CHRISTIAN MAGOON: Well, it did spike during the pandemic. And it spiked from about 11% to 16%. Now it's settled just under 15%. But yeah, I think the point is, with online retail, we're still in the early stages. Global market share for online retail was above 20%. The US is still under 15%. Why is that? Well, we like to drive and take our automobiles out. Our mobile payment technology isn't as robust as countries in Asia and Europe. And there's this tradition of simply going to the store.

Well, that really changed and boosted kind of the penetration rate during COVID. And we think that's going to only accelerate growth going forward. Going back to 1999, pre-COVID, we saw 20% a year compounding average growth rate of online retail market share. And we think that will continue to happen. The World Bank thinks that we're going to get to 50% online retail market share worldwide in the next 20 years. If that's the case, US companies have a huge amount of upside because they're only selling about $0.15 of every dollar here in the US today.

JULIA LA ROCHE: Mm-hmm. Christian, I want to go back. You mentioned a $4,000 kind of price target that you have in mind. I would love to kind of hear your thesis on that. I'm looking at the stock. It's at $3,454.20 right now. What are the drivers and the catalysts for you going forward?

CHRISTIAN MAGOON: Well, I think, you know, first of all, Prime Day could be a great catalyst. If they're able to show that they're going to beat their record sales last year during the lockdown, I think that's huge. This year, 20 different countries are going to be participating. Two caveats-- India and Canada are out. So not ideal, but still a good amount of markets that are open for them. They can execute there, then successfully transition the CEO role. I think that's going to be big.

AWS and that unit really seems to be the big growth side of this business. So they have to defend against Google and Amazon and Microsoft here in that battle. And then, finally, I think they have to come through this whole regulatory environment clean. Either maintain their business, or if they're going to break up, break up in maybe two to three entities, which could unlock a lot more value than maybe $4,000 could in aggregate for the Amazon shareholder.

This is a massive company involved in so many businesses. And perhaps the market is discounting it right now, believe it or not, at $3,500, based off what it would be valued at independently. So we're going to be watching all of those unique kind of variables going into the next year. And again, we are bullish on Amazon here.

ADAM SHAPIRO: Christian, when you bring up the regulatory future for them, there is the new head of the FTC, who certainly seems to have her sights on breaking them apart. As an investor, though, how long should I be willing to wait for that to play out? That could take years, couldn't it?

CHRISTIAN MAGOON: Yeah, it really could. And it could be a lot of negotiations in store for Amazon. And maybe potentially Amazon could outlast the Biden administration. And maybe we could see somebody new at the FTC. Certainly, Amazon has a lot of resources. We think when investing in online, the challenge-- in online retail stocks, the challenge is not to get overly concentrated in a company like Amazon. Because we've actually seen better performance over time, owning some of the smaller names.

Our online retail ETF, IBUY, has more than doubled Amazon in terms of performance over the last year. And it's been these names like a Shopify or a Stitch Fix or a Wayfair or Etsy that have really driven a lot of the gains in the online retail space. And Amazon may be a victim of its own success here and maybe get less focused on this massive opportunity of online retail market share. And if that's the case, you know, investors need to pay close attention to how long they want to hold that. Because again, we could see some staleness in Amazon if it gets in a long-term debate with the US government on being a technology platform that has too much monopoly type powers.

JULIA LA ROCHE: Christian Magoon, Amplify ETFs CEO, thank you so much for your time.