The Ratings Game: Amazon’s 175,000-worker hiring spree suggests strong first-quarter sales despite COVID-19, analysts say

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Analysts say Inc.’s massive hiring spree in the wake of the COVID-19 outbreak suggests that the e-commerce giant will have strong sales to report when it releases first-quarter earnings.

Amazon US:AMZN is scheduled to report after the closing bell on April 30.

The company announced on March 16 that it would bring on an additional 100,000 workers, a goal it fulfilled. On April 13, Amazon said it would hire 75,000 more.

Oppenheimer analysts estimate that each new hire represents $75,000 in quarterly net online sales increase.

“We see upside to revenue as evidenced by Amazon hiring 175,000 additional workers to keep up with increasing demand, as well as a temporary pause of the third-party Fulfilled by Amazon business because of strain on fulfillment network,” analysts wrote.

Oppenheimer also sees benefits for Amazon in Target Corp.’s US:TGT business update, which included a 100% increase in digital sales for the quarter to date.

Read:Target’s soaring online growth suggests scared shoppers may not return when malls and department stores reopen

“In our view, COVID’s impact accelerates the secular shift to e-commerce (U.S. e-commerce at 12% of retail sales) and Amazon is well positioned to continue taking share,” Oppenheimer said.

Oppenheimer rates Amazon stock outperform with a $2,700 price target, up from $2,400.

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SunTrust Robinson Humphrey analysts also raised their price target on Amazon shares, to $2,770 from $2,450.

“We expect very strong top-line results, driven by Amazon’s market leadership in e-commerce and COVID-19 catalyzing a large shift in consumer spending from offline to online,” analysts wrote.

“While some upside is likely priced in, we believe the market still under appreciates Amazon’s dominance in two large, secular growth industries in e-commerce and cloud, and emerging position in online advertising.”

Though coronavirus has created massive headwinds for many retailers, including department stores like Macy’s Inc. US:M and J.C. Penney Co. Inc. US:JCP , SunTrust says the pandemic has generated a number of tailwinds for online retail.

Also:Amazon has the right business to weather coronavirus but spending could grow even faster

“While we expect some of this demand to be transitory, we also believe this event will train new consumer habits and accelerate the shift of retail from offline to online,” SunTrust said.

“Going into COVID, we believe Amazon had roughly ~1/3 market share of total U.S. online retail, and we believe coming out of COVID, the acceleration in the shift to online, coupled with market share gains should drive robust financial performance for multiple years.”

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Still, SunTrust says that weakness in consumer spending could pose a challenge as unemployment numbers and consumer sentiment put pressure on shoppers.

Amazon stock has rallied 23% over the past year while the Amplify Online Retail ETF US:IBUY has gained 5.2% and the S&P 500 index US:SPX is down 2.3%.

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