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RBC Capital believes that there’s a quickly growing but overlooked part of Amazon’s business — specifically, Amazon Business — with earnings that will exceed more than $30 billion in just a couple years.
“We believe Amazon Business has largely been ignored by investors,” RBC Capital Markets analyst Mark Mahaney said in a note on Friday.
The device is Amazon’s business-to-business, or B2B, market, serving many different customers from large companies to hospitals, in addition to schools and colleges. Amazon Business has a vast array of offerings, as consumer choices vary from specific industrial goods to as wide as office supplies.
“With GMV [gross merchandise volume] over $10B and growing faster than Amazon’s Retail and AWS sections, it continues to gain market share while also triggering seismic adjustments to ecommerce business models across the industrial distributor landscape, with Underperform-rated Grainger still in the cross hairs,” Mahaney said.
RBC quotes Amazon’s company will see earnings reach $31 billion by 2023, as sales quintuple to $52 billion over the same period.
Amazon established the unit 2015, with Mahaney noting that it hit $1 billion in sales its first year. RBC noted Amazon Business last year reached more than 2 million clients around the planet, in addition to over 200,000 sellers offering countless millions of products.
Amazon Business has also outstripped its retail e-commerce business and even cloud unit Amazon Web Services (AWS) in growth, RBC said. Mahaney estimated that Amazon Business’ 115% compound annual growth rate over three years has been faster than the retail industry, at 28 percent, in addition to AWS, at 48%.
“We believe Amazon is well positioned to gain market share,” Mahaney added.
RBC estimates the total addressable B2B marketplace is $67 trillion, almost 3 times the size of the worldwide retail market. The company says the B2B world is “inefficiently served,” citing in a comparatively low quantity of online sales.
“Amazon has the right competencies—substantial competences include logistics, large scale, loyal customer base, and technology infrastructure,” Mahaney said.
RBC has an outperform rating on Amazon’s stock.
— CNBC’s Michael Bloom contributed to this report.