3 Reasons Amazon Stock Can Add 50% in the Next Year

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Amazon (NASDAQ:AMZN) stock was a buy at the beginning of May, and it is even more of a buy now. Amazon stock is more than $100 off its 52-week high, presenting an opportunity to buy the dip in a truly remarkable company that is disrupting several industries in one go.

Amazon stock AMZN stock

Recently, a Pivotal Research analyst made headlines by establishing a $2,750 12-month price target on AMZN.

This would mean Amazon would have 50% increase from current levels, implying a market capitalization of $1.35 trillion, for a stock that is already up over 20 percent for the year may sound steep, but it is not completely farfetched.

Amazon Keeps Disrupting

Earlier this month, Amazon India confirmed that they had launched domestic flights in India. As part of a “superapp” they are developing, customers will be able to book flights, make utility payments, transfer money, and shop for other products.

Amazon is no longer just an app for shopping.

This is a blueprint for other regions to see how much market share Amazon can take. It won’t be hard with the kind of volume they have. Amazon can give discounts to get a solid toehold, and if the numbers look good, this is a big revenue generator that current stock valuations haven’t factored in.

Amazon Keeps Investing

While it was not a surprise when Jeff Bezos broke ground at the Kentucky airport for a new Amazon Air hub, in March the announcement of a $700 million investment in electric vehicle start-up Rivian, did surprise some investors. Their investment is larger than that of an actual automaker, Ford Motor Company (NYSE:F), and was done quietly without much commentary.

While this does not mean Amazon has any plans to go toe to toe with auto manufacturers, it is a deft move by Bezos. He can now have ready insights into cutting edge innovation in transportation technology, which has a direct impact on shipping.

Shipping is a major cost that runs over $7 billion (as of the most recent quarter), and cost savings here have a large potential to improve cash flow. Amazon is held to a different financial standard wherein profits take a backseat to growth. However, as growth tempers, improvements on the cost side will keep concerns at bay.

Amazon Keeps Partnering

As of January, Amazon was already piloting self-driving trucks developed by Embark to help haul cargo. If Amazon is going to ensure its ability to deliver on its promise to customers for one-day shipping, this is part of ensuring that the value proposition holds. It won’t be a revenue driver, but it could eventually become a cost saver.

It may also reduce headaches as driver shortages have become a problem in the trucking business. Partnering with firms working on autonomous systems and developing delivery drones are ways that guarantee Amazon’s continued success as an integrated ecommerce platform.

These strategic investments ensure long-term dominance. Competitors like Walmart Inc (NYSE:WMT), which trades at an alarming 35x earnings, have made a valiant attempt to invigorate their own ecommerce efforts and with some success, but it seems they are always playing catch-up with Amazon.

Over time Amazon will continue to widen its lead, and it is because of infrastructure and technological investments in the likes of Rivian that make Amazon best-in-class now and for the foreseeable future.

As of this writing, Luce Emerson did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2019/06/3-reasons-amazon-stock-can-add-50/.

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