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The Unflinching Rise Of Amazon's Stock Price Begs 3 Questions

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The Unflinching Rise Of Amazon's Stock Price Begs 3 Questions

Amazon.com, Inc. (NASDAQ: AMZN) seems unbeatable. It’s share price is up over 28 percent this year, 339 percent over the past five years, and currently sits at $957.

Those numbers include the major tech sell-off on June 9, since which the stock has fallen 5.2 percent from $1011.

This despite EBITDA revisions down 10 percent since third quarter 2016 earnings. Amazon’s huge outperformance made Nomura analyst Anthony DiClemente question the basic principles behind the company’s coverage.

3 Questions

First, how should analysts value a company that consistently reinvests its profits to drive future growth?

Amazon is working on a seemingly endless range of products and markets, including artificial intelligence, brick-and-mortar book stores, drone delivery, original entertainment, pharmacy and high-tech grocery stores.

DiClemente’s second question is whether there have been any fundamental changes in Amazon’s investment narrative?

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The question could also be posed as: Is Amazon just pursuing interesting ideas as they happen, or is there some underlying theme?

The analyst’s third question is how valuation frameworks need to evolve in as Amazon’s total addressable market expands

In light of Amazon’s growth and considering these questions, DiClemente reiterated his Buy rating for the company and raised its price target from $975 to $1,100.

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Latest Ratings for AMZN

DateFirmActionFromTo
Feb 2021CitigroupMaintainsBuy
Feb 2021UBSMaintainsBuy
Feb 2021BenchmarkMaintainsBuy

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