Amazon.com, Inc. (AMZN) stock briefly touched $1,000 on Tuesday and again on Wednesday before plunging into the $980 range after some analysts and gurus offered dire warnings. However, it seems some investors didn’t get the memo, or they just don’t see anything to be concerned about. Amazon.com, Inc. (AMZN) stock rallied back into the $990s and looked on track to hit $1,000 again, if not on Wednesday, perhaps later this week.
Can Amazon.com, Inc. (AMZN) stock break the psychological barrier?
When Amazon.com, Inc. (AMZN) stock reached $1,000 for the first time, it met with a psychological barrier that it just couldn’t cross, and CNBC‘s Jim Cramer warned about possible red flags on Tuesday. One particular aspect of it is the fact that it was only very briefly that Amazon.com, Inc. (AMZN) stock breached the $1,000 level. The shares didn’t pass that price and keep on going; it was like they hit a ceiling.
Cramer recalled a group of momentum stocks commonly referred to as the “Nifty Fifty” during the 1970s, and they soared far past where their fundamentals could have taken them at the time. A widely-held view at that time was that the Nifty Fifty stocks would just keep rising steadily, so investors didn’t need to even consider pulling out. But unfortunately for investors who dove in toward the top, the Nifty Fifty did reverse course.
Although they didn’t cause the entire market to crash, he said when they did start to plunge, many investors were no longer willing to invest anywhere in the stock market.
What’s driving Amazon stock?
But perhaps more importantly, the Mad Money host is concerned about the brief crossing because he feels that indirectly, President Donald Trump and Washington are driving Amazon.com, Inc. (AMZN) stock. He pointed out that the company is able to thrive no matter what policymakers do, which is important at a time when it seems like the Trump administration can’t get its act together.
A key part of Trump’s campaign was corporate tax reform and a tax repatriation holiday, but it’s starting to look like neither will happen. Cramer explained that right now Amazon.com, Inc. (AMZN) won’t benefit from a corporate tax cut because it doesn’t need it to continue expanding globally. It also doesn’t need to repatriate cash because of its focus on international expansion.
Further, the company isn’t heavily regulated like so many other companies are, so Trump’s push for deregulation doesn’t matter.
Cramer effectively sees Amazon.com, Inc. (AMZN) stock’s flirtation with $1,000 as an omen for one of two scenarios, but he says it’s too early to know which will happen. One is “a long, hot summer of wall-hitting” as not only Amazon.com, Inc. (AMZN) but each of the handful of other “frantically thriving momentum stocks” goes on a tear and then starts forming head-and-shoulders chart patterns before plunging.
The other scenario is that other stocks join the party, which he said suggests that this rally in Amazon.com, Inc. (AMZN) stock could stick around. The Mad Money host ultimately wants to see more than just Amazon.com, Inc. (AMZN), Tesla and Alphabet rising steadily, but we’re not there yet.
Is Amazon stock heading for $2,000?
While Cramer is looking at the big picture, many are hyper-focused on Amazon.com, Inc. (AMZN) stock by itself. Analysts have been floating price targets in excess of $1,000 since last year, with many of the newest $1,000 and up price targets being set since the company’s last earnings report.
Forbes contributor Peter Cohan expects Amazon.com, Inc. (AMZN) stock to reach $2,000 in 2019, and he credits CEO Jeff Bezos with the stock’s performance. He feels that Bezos is the best CEO on the planet and notes that the company leads in multiple industries.
However, others note that competition is Amazon.com, Inc. (AMZN)’s biggest potential threat, and it faces big competition in the two industries it dominates: e-commerce and cloud services. KeyBanc Capital Markets Managing Director Ed Yruma told USA Today that Wal-Mart is the company’s biggest threat in e-commerce, especially since its acquisition of Jet.com. He notes that Amazon.com, Inc. (AMZN) has been targeting upper- and upper-middle income customers, while Wal-Mart has been focusing on middle-income customers. He adds that middle-income shoppers are starting to move some of their spending online, and they aren’t loyal to Amazon.com, Inc. (AMZN), or at least not yet.
The company’s cloud business is still the clear leader in cloud computing, even ahead of tech giants like Microsoft and Alphabet, but as the land grab in this industry continues, it certainly can’t rest on its laurels.