Amazon.com, Inc. (NASDAQ:AMZN) stock was off and running out of the gate this morning, quickly getting on track for a sixth straight day of record highs. As of the time of this writing, Amazon stock hasn’t yet touched $1,600, but it’s looking like it could before the day is over. It seems the online retailer can do no wrong in the eyes of investors as its appetite for new markets continues to pay off with no barriers in site.
Deutsche Bank analyst Lloyd Walmsley issued a bullish note on Amazon stock today, including thoughts on a recent visit to an Amazon Go store and other aspects of the company’s business. The DB team recently took a tour of the Go store in Seattle, which opened to the public earlier this year. They feel the company has a good system and found that they were indeed only charged for the items they left the store with.
This has been a concern as the company prepares to add to its Amazon Go store chain, as there have been questions about how a cashier-less grocery store can accurately figure out what shoppers are picking up and charge them accordingly. Still, one has to wonder how they are to make sure that the company is charging them the listed price, as a human cashier can make an adjustment at the cash register if an item isn’t scanning at the appropriate price. Since everything in the Amazon Go store is done by computers and trackers, it’s virtually impossible to know whether you’re being charged the correct amount for every item.
The DB team also said after their visit to the Amazon Go store that there are some things the company can improve, but they still see it as the store of the future.
Of course, there’s much more to the story than the Amazon Go stores, as Walmsley also highlighted advertising, AWS and video as other key areas of growth for the company. He believes demand for ads on the company’s website is still “extremely high” among big brands and third-party sellers alike. As a result, he said Amazon has been building out more tools to address it, including a self-serve API which allows big brands to buy ads on the platform.
Earlier this month, the company also revealed three changes to ads based on headline searches. Amazon is expanding its ad inventory from just the listings at the top of the page to include more ads along the side and bottom. The company also added automated bidding for ad buyers and expanded sales of its Sponsored Products ads beyond Fulfillment by Amazon sellers.
Walmsley and team also met with a major partner of Amazon Web Services and heard that even though enterprises want to shift their workloads to the public cloud, they’re concerned about the “speed and effort” that’s needed to do it. As a result, the hybrid cloud model is gaining in popularity, and Walmsley believes Amazon will adopt this model soon, based on the partnership with VMWare.
The DB team also highlighted video, which CEO Jeff Bezos has indicated could become the fourth pillar for the company. If this happens, Walmsley believes Amazon will roll out additional video outside of Prime and with different methods of monetization attached. He suggests that the U.S.-based firm could take cues from Alibaba by including more ads inside its videos. He has a $1,650 price target and Buy rating on Amazon stock.
Not everyone sees the sky as the limit for Amazon stock right now. Late last week, Piper Jaffray analyst Craig Johnson told CNBC that he was concerned about the meteoric increases in Netflix and Amazon stock because they were really the only two companies rallying while the rest of the market trudged along. Although Amazon stock has touched at least 12 all-time highs since Jan. 26, when the rest of the markets reached records of their own, just a tenth of the Dow Jones and a fifth of the S&P have bounced back to the highs in January.
However, there was a bit of encouragement for the broader market today, as major indices rose along with Amazon stock. The Dow Jones Industrial Average was up 63 points early, while the S&P 500 gained 7 points and the Nasdaq Composite rose 31 points. Ten of the 11 sectors in the S&P climbed after the opening bell
Michael Bapis of HighTower Advisors also told CNBC that he was concerned about the rapid climb in Amazon stock. He drew comparisons with the dotcom bubble in 2000 and 2001, when investors couldn’t get enough of Internet stocks.