Amazon (NASDAQ:AMZN) stock looks well positioned to have a great year in 2022.
While the Seattle-based online retail colossus has trailed other mega-cap technology stocks throughout this year and underperformed the broader stock market, that poor performance is expected to end in the New Year with AMZN stock poised for a big run higher.
In fact, Goldman Sachs just named Amazon its top technology stock for 2022, saying that the company’s growth trajectory should accelerate throughout the next year as supply chains improve, inflation eases, and labor pressures subside.
Goldman’s endorsement is just the latest in a series of bullish reports on the near-term prospects for Amazon stock.
In a note to clients, Goldman Sachs analyst Eric Sheridan wrote that Amazon should benefit in coming months from resurgent growth in a range of markets such as e-commerce, cloud computing and advertising. “We see Amazon as a top pick on a 12-month view with an increasingly positive skew in its risk/reward after a pronounced period (16+ months) of share underperformance,” Sheridan wrote.
The report from Goldman Sachs was welcome news to Amazon shareholders who have had to watch as the company’s stock largely traded sideways throughout the past year.
Amazon’s shares have gained only about 10% in 2021 as it grappled with rising labor costs, high inflation and global supply chain disruptions. AMZN stock has been the worst-performing of the so called “FAANG” stocks that also includes Google parent company Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL), Apple (NASDAQ:AAPL), Meta Platforms (NASDAQ:FB) and Netflix (NASDAQ:NFLX). Amazon’s share price has also trailed the benchmark S&P 500 index, which is up 25% year to date. Goldman Sachs’ current $4,100 price target on Amazon stock implies a potential gain of 15% from its current price.
Goldman isn’t alone in its positive outlook for AMZN stock. Among the 41 professional analysts who cover Amazon, every one of them has a “buy” rating on the company’s stock with a median price target of $4,000, which would be 12% higher than where the share price sits currently. The high estimate on the stock is $5,000.
The fact that Amazon’s stock is up at all this year is a bit surprising considering that the company missed Wall Street expectations in its last two quarters and provided weak forward guidance for the current fourth quarter when the company typically gets a boost from holiday shopping and Black Friday/Cyber Monday sales events. Amazon’s third quarter earnings per share (EPS) came in at $6.12 compared to $8.92 per share that had been expected. The company’s Q3 revenue totaled $110.81 billion versus $111.6 billion that had been forecast.
For the fourth quarter, Amazon forecast sales between $130 billion and $140 billion, representing growth of between 4% and 12%. Analysts surveyed by FactSet had expected Q4 revenue to rise 13% year-over-year to $142.1 billion. Yet despite the subpar quarterly results and gloomy forward guidance, AMZN stock only fell about 4% initially on the report before quickly recovering.
Since the beginning of October, Amazon’s share price has actually gained 12%. Compare this result to other major companies such as Disney (NYSE:DIS) and Roku (NASDAQ:ROKU) whose stocks have been crushed like tin cans after delivering disappointing earnings results.
That AMZN stock has remained resilient is a testament to both its market leading position and the faith investors have in the company to turn things around in short order. Key to Amazon regaining its momentum will be its ongoing diversification. While online retail sales continue to provide the bulk of the company’s revenue, it is also growing other business segments such as cloud computing, where third quarter revenue from Amazon Web Services rose 36% year-over-year, and its advertising business, which saw a Q3 annualized gain of 70%.
Building on these other business segments will only strengthen Amazon and help the company fulfill its own projections of earnings per share growth of 36% annually over the next five years.
Buy AMZN Stock Before It Gets More Expensive
Amazon has been a laggard over the last 11 months compared to its peers. But all indications are that the company and its stock are set up for a big reversal in coming months. As such, investors should view Amazon stock as being on sale right now and should take a position before it becomes more expensive to do so.
With positive sentiment and favorable economic conditions supporting it, as well as a competent management team and increasing diversification of its operations, Amazon is in a strong position to outperform in the year ahead. Investors looking for a reliable bet in 2022 should consider the e-commerce giant.
AMZN stock is a buy.
On the date of publication, Joel Baglole held long positions in GOOGL and DIS. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.