With Amazon.com (NASDAQ:AMZN), investors can’t be blamed if they think they can have it both ways. On the one hand, AMZN stock still boasts all the moxie and muscle of a growth name.
And on the other, it’s matured into a company far beyond its e-commerce roots, with a market capitalization that surpasses the yearly gross domestic product of Canada, South Korea or two Saudi Arabias.
Though it trades in nosebleed territory above $3,000 per share, AMZN stock is actually down so far in 2021. Did you hear that? Down. Fine, off by 8% isn’t exactly a portfolio slayer. But it does suggest that Amazon isn’t invulnerable and faces at least one significant hurdle in the months ahead.
For you see, loyal Amazon shoppers — as in those who buy and hold AMZN stock — founder and CEO Jeff Bezos is riding off into the sunset. Yes, his hand-picked successor, Andy Jassy, is a company veteran. But fans will be fans, and the departure of Bezos is a bit like watching history-making football coach Vince Lombardi leave his beloved Green Bay Packers. (OK, Chicago Bears fans don’t love the Packers. But Da Bears haven’t won a Super Bowl in nearly four decades.)
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AMZN Stock and a History of Post-CEO Peril
The House of Bezos will stand strong and mighty like an investor’s Fort Knox. But is there any credence to the fear that surrounds his full-time departure? In a word, yes. History gives us multiple examples, in fact.
When legendary CEO Jack Welch retired from General Electric Co. (NYSE:GE), it was a financial services giant and for a time, the world’s most valuable company. But since then, its stock has plummeted 75% and its once-dominant dividend is now close to bupkis. The slide is actually more like 80% once you factor in inflation. Hey GE, who turned out the lights?
And when Steve Ballmer succeeded the mighty Bill Gates as CEO of Microsoft Corp. (NASDAQ:MSFT) in 2001, the company stalled and suffered for the next dozen years. After Ballmer announced his retirement in 2013, MSFT stock jumped 33% in a year.
So yes, AMZN stock holders have reason to bite their platinum nails with their gold-capped teeth. But only, and I mean only, in the general sense. The truth is, no one is likely better equipped to lead Amazon than Jassy, who knows the company almost as well as Bezos himself.
What Life After Bezos Will Look Like
Observers and even some investors make the mistake of viewing Amazon primarily as a place to buy everything from baby cribs to funeral caskets. And for sure, they’ve got you covered in e-commerce, cradle to grave. But beyond the merchandise, the streaming services, the ownership of Whole Foods and all that, Amazon is heavily invested in cloud computing.
As the current CEO of Amazon’s cloud business (Amazon Web Services), Jassy oversees the company’s biggest profit driver. And he has the stuff to lead Amazon to stratospheric heights if he can leverage what he’s already built. That he built it, not so much Bezos, should cheer everyone who owns AMZN stock.
To be sure, Jassy hasn’t shown a tenth of Bezos’ charisma to date. But he doesn’t have to. One example of a CEO who further expanded on what a legend handed off to him is the fairly button-down Tim Cook, who took Steve Jobs’ baby and turned Apple Inc. (NASDAQ:AAPL) into the world’s most valuable company.
In the Final Analysis, Amazon Will Win Big
I have believed in AMZN stock for some time, and, for the foreseeable future, I see nothing but blue skies and robust returns once the Bezos groupies shake off their jitters. CNN Business has crunched numbers from 47 analysts and come up with a 12-month median price target of $4,000. If that comes to pass, it would mark a jump of over 30%. Against inflation or an index fund, I’ll take that any day.
What’s more, more than four in five analysts call AMZN stock a buy. Once you factor in the outperform ratings, the proportion of thumbs-up votes climbs to an astounding 96%. No one says investors should sell the stock, by the way. I mean, why would they?
I could continue to crunch more numbers, provide more insights and whip out fancy investor jargon. (Dollar-cost averaging is one of my favorite least favorites. In my mind, the average cost of a dollar is $1, give or take a few micro-cents.) The point is this: The plateau for AMZN stock is temporary. Very temporary. Now may be the best time to buy the shares this year.
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On the date of publication, Lou Carlozo held long positions in AMZN, AAPL and MSFT.