Amazon (NASDAQ:AMZN) is an e-commerce and technology giant. And after slumping since mid-summer, its stock could be due for a massive rally. AMZN stock got a slight bump yesterday, closing at $1,735.91. But it remains significantly off the $2,017.41 it hit in July. Year-to-date, the Amazon stock price is up 17.6%.
And there’s one analyst calling for it to outperform over the next year, with the potential to reach between $2,000 and $2,400.
$2,400 would represent an upside of 38%. Even $2,000 — a level AMZN stock has broken through three times since last August — represents a 15% gain.
Analyst Targets Amazon Stock Price’s Value
Strategic Wealth Partners President Mark Tepper appeared on CNBC’s “Trading Nation” on Friday. There he made the case that the fair value for Amazon stock is between $2,000 and $2,400. Given its current trading price, the upper end of that valuation represents a 38% upside for Amazon stock.
This analyst is far from alone in predicting that significant growth is ahead. CNN Business surveyed 42 investment analysts and their median 12-month price target for AMZN is $2,288, with a low-ball estimate of $2,080. The highest comes in at $2,615.
And if that wasn’t enough, multi-billionaire Mark Cuban revealed on Monday that AMZN stock is his largest holding. The Dallas Mavericks owner holds nearly $1 billion in shares.
So why is everyone so pumped up about Amazon?
A Multi-Faceted Strategy
Although it started life as an online book retailer, Amazon has expanded relentlessly. It is the largest e-commerce company in the U.S. and one of the world’s largest retailers. Amazon Web Services is one of the biggest cloud computing vendors, generating $8.4 billion in revenue in the last quarter. And it is estimated that over 105 million people pay for an Amazon Prime membership. 82% of U.S. households have at least one Prime member.
Amazon leads the smart speaker market with its Alexa-equipped Echo line, and last week the company unleashed 15 new smart products, including wireless earbuds and eyeglass frames with Alexa voice integration.
This strategy means that AMZN has big competitors for every element of its business. For example, it’s sparring with retailers like Walmart (NYSE:WMT) on the e-commerce front, Microsoft (NASDAQ:MSFT) and other tech giants for cloud computing, Alphabet’s (NASDAQ:GOOG, NASDAQ:GOOGL) Google for advertising, and the Alexa smart home battle pits Amazon against both Google and Apple (NASDAQ:AAPL).
However, Amazon is not afraid of spending money. This year saw the costly move to one-day Prime shipping. Then there are the billions it spends on R&D — and the billions more it has sunk into AWS infrastructure. Those expenditures have paid off with market share. In addition, many of its business lines are complementary (for example, selling advertising on its shopping app and enabling consumers to buy products from Amazon.com using their Alexa smart speaker). And tying things in a neat bow for the consumer end of its business is the Amazon Prime program that helps lock in customers.
It’s a formidable approach that has been hugely successful (despite the competition), and its reflected in the optimistic valuations for AMZN stock.
Yes, AMZN Stock is a Buy
Given everything that Amazon is involved in — and the scale of its involvement — the company only continues to gain momentum. It may have had trouble consistently remaining in the trillion dollar club, but with factors like the trade war with China roiling the markets over the past year, most tech companies have felt the impact.
At its current $1,737 level Amazon stock is a buy, with a high likelihood for significant gains over the next year. Plus there’s the very real possibility that AMZN could hit $2,400.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.
