Every so often, analysts trigger a bidding war of sorts on Wall Street darlings by trying to one-up each other on target prices. After another spate of price target increases for Amazon.com Inc. (NASDAQ:AMZN) stock this week, the Street-high price sits at $1,500. It’s hard to imagine how any analyst will move higher on Amazon stock, but then again, the company’s annual cloud conference is inspiring a whole new level of interest for Wall Street.
New Street-high Amazon stock price target: $1,500
D.A. Davidson is currently at the top of the heap for price targets for Amazon stock, at least among firms reporting their numbers to FactSet. In a note to investors on Wednesday, D.A. Davidson analyst Tom Forte reiterated his Buy rating and boosted his price target for Amazon stock from $1,300 to $1,500.
While most other analysts seem to be mostly ignoring Amazon’s physical presence, Forte chose to focus on it. In addition to the 465 Whole Foods stores Amazon owns now after the acquisition, the company also owns about 10 bookstores and is partnering with Kohl’s. He believes that Amazon’s physical presence is the main “story” of its holiday sales this year and also a sign of what’s to come.
Amazon estimates adjusted
One of the more reasonable price target increases given to Amazon stock this week is from MKM Partners analyst Rob Sanderson. He raised his target to $1,350 from $1,275 and maintained his Buy rating on it. He continues to describe Amazon stock as “the best long-term growth story available to large-cap investors today.”
Sanderson analyzed the company’s margins and noted that gross margins have improved 940 basis points over the last four years as it shifts away from being a direct seller of products and toward non-selling services with higher margins. He expects non-selling activities such as third-party sales/ Fulfillment by Amazon, AWS, subscriptions, and advertising to be 36% of total revenue this year, compared to 20% four years ago.
As the mix shift continues, Sanderson expects the gross margin to keep improving, and he expects Amazon to keep shifting away from selling despite the acquisition of Whole Foods, which brought about $17 billion worth of revenue from physical stores. He also expects Amazon management to continue aggressively reinvesting profits in future growth just as they have been.
AWS conference highlighted
The AWS re:Invent conference is one reason so many analysts are updating their models and price target for Amazon stock. Baird analyst Colin Sebastian said in a note on Wednesday that he expects Amazon Web Services to remain the leader among cloud platforms, even while competitors narrow the gap.
As promised by executives, the focus in the early part of the conference has been artificial intelligence and machine learning, serverless architecture and DevOps, he noted. He feels that Amazon may be addressing some of the “nagging competitive concerns” regarding Google and Amazon. He said that this year’s conference has turned perceived weaknesses in the areas of AI and machine learning and security into strengths. Sebastian maintained his $1,100 price target and Outperform rating on Amazon stock.
JPMorgan analyst Doug Anmuth reiterated his Overweight rating on Amazon stock this week as well, emphasizing the company’s accelerated launches of new features. He feels that the new features will make it difficult for competitors to catch up to Amazon.
Amazon stock rose by as much as 0.89% to $1,171.55 in intraday trading on Thursday, although it still hasn’t regained everything it lost in Wednesday’s tech selloff.
