Despite falling 3% on August 5 after trade tensions flared, Amazon.com, Inc. (AMZN) appears to be on track to sustain its upward trajectory.

In the last five years, the ecommerce giant has gained 494% with a majority of its growth being attributed to the North American market. However, one five-star analyst believes that this is about to change thanks to market launches in five of the top GDP markets (India, Brazil, Mexico, Australia, and Turkey— "The Five"). RBC Capital analyst, Mark Mahaney, published a report on August 5 stating that he thinks AMZN’s international retail growth could exceed North America’s for the first time since 2009. As a result, the analyst not only reiterated his Buy rating and price target of $2,250 (26% upside potential), but also increased his expectations for 2021 revenue.

We wanted to delve deeper into the analyst’s report to see if “The Five” have the potential to bolster AMZN’s long-term growth prospects.

Revenue Opportunity From “The Five”

International revenue already accounts for a significant portion of the company’s total retail revenue, with 63% generated just from Germany, the UK and Japan.

However, AMZN has been consistently expanding its reach to other international markets. It has entered into India, Brazil, Australia, Mexico and Turkey, five of the top twenty GDP markets, in the last five years.

“Based on our analysis of each of The Five’s retail markets, online retail sales penetration, Amazon’s online market share, and its competitive position, we believe these five markets can contribute a combined +$25 billion in revenue for AMZN by 2023. This would amount to a 31% five-year CAGR, which compares quite favorably to the 16% for international retail sales and 18% for total retail sales over the same period,” Mahaney writes.

Revenue Growth from India Alone

India’s market is comprised of more than 1.3 billion people, $2.7 trillion and $631 billion in retail spending. According to the Asian Development Bank, its GDP is expected to gain 7% in 2019 and at a 7.3% five-year CAGR through 2023. This is compared to the global market’s 3.3% expected growth rate. Online retail sales in India are expected to increase 27% year-over-year to $40 billion in 2019 and at a 26% five-year CAGR to $92 billion by 2023.

AMZN already has 50 fulfilment centers and over 90 delivery stations in India as well as makes up 30% of the ecommerce market.

Amazon isn’t stopping there. In June, the company launched its largest delivery station in Telangana that can power last-mile delivery capabilities. It has also shifted focus towards expanding its physical locations after regulatory changes went into effect in February. The new regulation banned e-commerce companies from forming exclusive selling arrangements with sellers or offering steep discounts to consumers based on those deals.

On August 1, rumors started swirling that Amazon is in talks to assume a 26% stake in the Indian retail company, Reliance. India’s largest retailer by revenue operates grocery stores and electronics stores throughout the country.

Mahaney argues that these efforts will pay off in the long-term. “We believe Amazon generated $5.6 billion in revenue from India and we estimate India’s revenue contribution to grow to $18 billion by 2023 (27% five-year CAGR), accounting for 13% of Amazon’s 2023 International Sales,” he said.

Potential from Australian and Mexican Markets

Sales in Australia and Mexico are also a key factor driving these predictions. “By 2023, Mexico and Australia, combined, could generate $9.2 billion in GMV and $5.3 billion in revenue. We project that the two countries combined could account for 4% of AMZN’s International sales by 2023,” Mahaney said.

What Are the Implications for AMZN?

The analyst claims that the contribution of “The Five” to AMZN’s revenue mix could lend itself to massive upside. Mahaney claims this warranted a revisal of his revenue estimates. He sees revenue growth accelerating much faster than previously expected. “Our revised estimates imply acceleration in International revenue growth to 22% year-over-year in 2021 vs. 16% in 2020, making 2021 the first year since 2009 that International Retail revenue growth would eclipse North America Retail revenue growth,” he writes.

Do Other Analysts and Financial Bloggers Agree?

On July 18, D.A. Davidson analyst, Tom Forte, said that AMZN’s international growth could be a catalyst for shares. “We see continued long-term growth potential due to Amazon’s increasing mix of highly-profitable international sales," he said. The analyst reiterated his Buy rating and $2,550 price target. He believes share prices could gain 43% over the next twelve months.

Top financial blogger, Jeremy Bowman, highlights growth opportunities in India as especially promising. “In many ways, the Indian market seems well suited to the company's strengths. India is densely populated, making for shorter delivery distances on average than in the U.S. And the retail industry is highly fragmented, meaning the company mostly doesn't have to contend with any large and entrenched native competitors,” he writes.

The Bottom Line

In general, the Street takes a bullish stance on AMZN. It has a ‘Strong Buy’ analyst consensus and a $2,284 average price target, suggesting 29% upside potential.