Wall Street Raises Target Price on Amazon, Why So Bullish?

  • September 27, 2020 08:00 AM AEST
  • Team Kalkine
Wall Street Raises Target Price on Amazon, Why So Bullish?

Summary

  • Amazon.com witnessed an improved target price and an upgrade to “outperform" by one of the market analysts, who stated that e-commerce giant would continue to strengthen from third-party merchants and premium subscribers even after the COVID-19 era.
  • The bullish outlook led to a jump of 5.69% in Jeff Bezos-led juggernaut’s share price on 22 September.
  • Amazon has been embracing the pandemic period and capitalising on the sudden shift to stay-at-home trend and expedited shift towards cloud computing services and digital business platforms.

Globally, COVID-19 market mayhem brought the economy to a standstill. The shut doors of numerous entities and educational institutions, however, led to an unprecedented demand for technology.

Burgeoning demand for cloud computing and digital services

The need for digital payments, work from home working option, e-learning, online shopping, boosted demand for digital payment technologies, cybersecurity, cloud computing, digital platforms, e-learning applications, video conferencing apps, and e-commerce sites. The demand augmented the market scope of The who’s who among the technology companies, i.e. the FAANG family (Facebook, Amazon, Apple, Netflix, and Alphabet) further. If one must say, FAANG stocks had been the tech market’s darlings primarily due to their innovative product and services, and technologies.

A quick read; Technology Space in the face of COVID-19; Investment Tips for Tech Stocks

Bullish Outlook for Amazon

Amazon.com, Inc. (NASDAQ:AMZN) experienced a jump of 5.69% in its share price on 22 September.

Interestingly, Jeff Bezos-led juggernaut’s share price jumped ad one of the market analysts upgraded the tech stock to "outperform" and quoted an improved target price, stating that e-commerce giant would continue to strengthen from third-party merchants and premium subscribers even after the COVID-19 era.

The COVID-19 induced shutdown created much volatility in the stock market, which was reflected across indices worldwide. Nasdaq Composite index, the technology bellwether index, which closed at 12,056.44 points on 2 September 2020, reached 10,778.80 on 21 September 2020, demonstrating a decline of ~11%.

However, the bullish outlook on Amazon on 22 September drove the Nasdaq Composite index to close at 10,963.64 points, indicating an increase of 1.71% from its last close. The index was running a dry spell since 2 September 2020 driven by massive sell-off in major technology entity shares such as Facebook, Amazon, Tesla, Apple, Alphabet, Microsoft, and Google. The index again witnessed a momentary dip, only to gain back to close at 10,913.56 on 25 September 2020.

Must read; Are Amazon, Tesla, and Alibaba the growth stocks in a slower economic growth world?

The e-commerce Behemoth Expanding Horizons amid Pandemic

Amazon has made considerable inroads into shopping as well as grocery verticals. The American multinational technology giant which focuses on digital streaming, digital marketplace platform and cloud computing is thriving in the market while witnessing astounding height.

With 100,000+ jobs available across its operational network in Canada and the US, and 33,000 open tech and corporate roles aiding Prime Video, operations technology, AWS, and Alexa, Amazon is one of the finest examples demonstrating the augmented growth of e-commerce. The Company is expected to open 100 new operations buildings in September across delivery stations, fulfilment centres, sortation centres and other sites with many of the new jobs located at Amazon’s newest buildings.

A 5 min read: Scoop the Stock Soup: FAANG, Tesla

Amazon had been capitalising on two fast growing market, cloud computing and e-commerce during the pandemic.

  • With millions of individuals working from home and shopping via online platforms, the demand for cloud computing services and digital business platforms expedited.
  • The COVID-19 pandemic era has generated and strengthened new online buying habits and shopping patterns. Shopping for apparels, entertainment, groceries, essentials, witnessed a phenomenal shift from brick-and-mortar stores to the online marketplace platforms.

Furthermore, with Amazon web services, the Company’s cloud computing services, Amazon has been supporting individuals as well as firms to operate smoothly with majority of the workforce working remotely.

On 16 September 2020, Amazon unveiled podcasts availability on all tiers of Amazon Music, bearing no additional cost. The podcast was notably launched across the UK, the US, the UK, Japan and Germany, throughout all service tiers.

Second quarter sales recorded a 40% jump year on year

On the financial performance front, during the second quarter ended 30 June 2020 (Q2 FY20), Amazon witnessed net sales of US$88.9 billion, showcasing a skyrocket jump of 40% (y-o-y). For Q3 FY20, Amazon projects net sales to strike in the range of US$87 - US$93 billion, representing a growth of 24%-33%. Operating income is expected to be in the range of US$2 - US$5 billion, compared with US$3.2 billion in Q3 FY20.

Also read: FAANGs Defining Resilience Amid Market Downtrends

 

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