Amazon (AMZN) has been on the watch list for a while now, leading the pandemic field e-commerce boom. This week has been big for earnings reports with Amazon reporting impressive revenues for the first-quarter on Thursday. Both the first and projected second quarter revenues far exceeded expectations putting the spotlight on the e-commerce giant. Amazon’s profits have been surging through the pandemic and now boasts 200 million Prime members worldwide. Let’s dive into the details and see why Amazon stock is still a buy.
The online retailer’s stock has risen 46% the past year and some analysts think it could still have further to go. As a result from this fantastic earnings report AMZN stock climbed 3.4%, giving it a good start.
Amazon reported revenue of $108.5 billion far exceeding analyst expectations that fall around $104.5 billion. This gives the company a year-on-year growth of 44%! Expected revenues surprised us too with second quarter predictions at $110 – 116 billion – way above the $108.5 billion estimates. Operating income is not that unchanged year-on-year due to around $1.5 billion of costs accountable to Covid-19.
So what is next for Amazon?
Whilst their cloud services division, Amazon Web Services, rose 32%, they have big plans to take this even further to expand virtual healthcare in the US. This tackles two of their targeted segments that makes Amazon the household name it is today. AWS is a profit powerhouse. In 2020, even though the segment made up just 12% of sales, it created a massive 59% of all operating profits.
“I think the power of AWS and their advertising and other software parts of their business and subscription models are the most exciting”Tech Analyst Brent Thill of Jefferies
So how do Amazon compare to competitors?
Currently, Amazon is the third-largest publicly traded company in the world, just behind Apple and Microsoft. Where Amazon sets itself apart is its cross-sector approach, the e-commerce giant does not stick to a particular consumer category being the “Earth’s biggest bookstore,” and leader in cloud computing. What is also easily forgotten is that Amazon works across the world and even generates through brick-and-mortar stores including Whole Foods and Amazon Fresh.
Looking at price-to-earnings (P/E) valuations for the six major tech stocks, Amazon doesn’t show the greatest promise. AMZN has the highest P/E ratio meaning big investments give comparatively smaller profits. But it is good to remember that this doesn’t stop the company from impressive growth that consistently outperforms expectations.
Amazon leads the pack having the most impressive potential growth and highest share “buy” ratings according to Wall Street experts.
These are just estimates, of course, and there’s no guarantee AMZN will get there. But the consensus of optimism among Wall Street firms is noteworthy nevertheless.
Should you buy Amazon Shares?
The current consensus among 50 polled investment analysts is to buy stock in Amazon.com Inc. This rating has held steady since March, when it was unchanged from a buy rating.
Amazon seems like a pretty reliable investment, but you could increase your earnings potential by timing your entry perfectly. Shares edged up 0.4% to 3,471.31 on Thursday, in range from a 3,436.03 handle buy point. This coincided with an early February peak for Amazon stock. Investors also could use 3,552.35, just above the consolidation high, as another entry.
Amazon Stock Price Forecast
The 45 analysts offering 12-month price forecasts for Amazon.com Inc have a median target of 4,000.00, with a high estimate of 5,200.00 and a low estimate of 3,420.00. The median estimate represents a +15.18% increase from the last price of 3,472.72.
“With broad-based strength across e-commerce & AWS, Amazon’s Q1 ’21 earnings report demonstrates why it remains the industry leader.”Michael Lasser, analyst at Swiss bank UBS
raised his price target for Amazon to $4,350 from $4,150.
Consistently outperforming revenue expectations imply that future earnings may exceed analyst forecasts. Needless to say Amazon’s impressive record of growth means their shares will make a strong addition to your portfolio.