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Can Amazon's share price shift gears with Stellantis deal? – CMC Markets


Amazon’s [AMZN] share price stalled in the first week of trading for 2022. Down 2.5% to close Friday at $3521.08, the slip reflected a muted start to the year among US stocks, with the benchmark indexes S&P 500 and Nasdaq also down on the week.

There’s no getting away from the fact that the near 3% gain Amazon’s share price eked out in 2021 was a shadow of the gangbuster performance seen in 2020. Back then the pandemic – and more specifically lockdowns – helped turbo charge Amazon’s share price to a phenomenal 73% gain.

Wall Street expects things will be better in 2022. An additional tailwind is the e-commerce giant partnering with Stellantis [STLA], one of the biggest automobile companies on the planet.

 

 

 

Amazon’s share price could benefit from Stellantis deal

Many think Amazon’s share price is poised to outperform this year. And a partnership with  automotive powerhouse Stellantis – the owner of Fiat, Chrysler and Dodge, among others – isn’t exactly bad for business. Under the terms of the deal Stellantis and Amazon develop software for a ‘digital cockpit’ in the car maker’s range of vehicles, with a likely launch in 2024.

Known as the STLA Smartcockpit, the platform would “seamlessly integrate with customers’ digital lives to create personalized, intuitive in-vehicle experiences through AI-enhanced applications for entertainment,” according to a Stellantis press release

“We’re excited to collaborate with Stellantis to transform the automotive industry and re-invent the in-vehicle experience,” said Andy Jassy, CEO of Amazon. “We are inventing solutions that will help enable Stellantis to accelerate connected and personalized in-vehicle experiences, so that every moment in motion can be smart, safe, and tailored to each occupant.” 

As Amazon attempts to expand even further into logistics industries and Stellantis seeks to compete with other major automakers, the deal could present both firms with a chance to challenge Tesla’s [TSLA] dominance in the software-driven transportation market.

“We are inventing solutions that will help enable Stellantis to accelerate connected and personalized in-vehicle experiences, so that every moment in motion can be smart, safe, and tailored to each occupant” – Amazon CEO Andy Jassy

 

And Tesla has gone the extra lap to make its offering. In January last year, Elon Musk tweeted that Tesla’s Model S sedan was powerful enough to allow drivers to play high-end video games like the Witcher 3 and Cyberpunk 2077. Although, in an act of humble pie, Tesla had to disable the ability to play video games on its center touch screens while a car was moving following pressure from the US regulator.

As part of the deal Stellantis will use Amazon’s AWS ‘as its preferred cloud provider for vehicle platforms’. In a separate deal Amazon has agreed to purchase electric delivery vans from Stellantis. 

This is bad news for Amazon-backed Rivian [RIVN]. Amazon had agreed to buy 100,000 electric vans from the start up, but with Stellantis now on the scene Rivian’s stock dropped below its IPO price last week, falling over 16% since the start of the year. Not helping was Stellantis CEO suggesting that “tens of thousands” of van sales to Amazon was “extremely conservative”.

 

 

 

Analyst expectations for Amazon share price and Stellantis

So where does Wall Street stand on Amazon and Stellantis in 2022? UBS analyst Kunal Madhukar has a Buy rating on Amazon with a $4,700 target, noting ‘multiple levers’ to drive margins. Over at JP Morgan, Doug Anmuth reckons that Amazon could surpass Walmart as the biggest US retailer in 2022. Anmuth has a $4,350 price target on the stock.

Goldman Sachs’ Eric Sheridan is similarly positive. Despite Goldman lowering its price target to $4,100 after Amazon’s underwhelming Q3 results, Sheridan has named the stock its top pick in 2022 in the internet space.

For Stellantis, analysts seem generally favourable. JP Morgan has an Overweight rating on the stock, while Citi analyst Gabriel Adler has a Buy rating to go with his EUR 23 price target. RBC Capital’s Tom Naryan initiated coverage with a EUR 17 price target.

Disclaimer Past performance is not a reliable indicator of future results.

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