AMZN stock forecast: Is Amazon a good buy?

• Updated

With a new CEO in place, it is time for an Amazon quarterly update and a new Amazon price forecast

While the Covid-19 pandemic hit a lot of businesses hard, some companies did quite well out of the series of lockdowns generated by the coronavirus. One such firm was Amazon. As a business which made its name in mail order, the online retail giant was perfectly positioned for a world where bricks-and-mortar retailers had to close their doors to customers.

However, things are always changing and, with a new CEO running the show since July 2021, there will be some adjustments in the Amazon stock forecast. We are going to have a look at what the Amazon stock price prediction is going to be, but first let’s take a look at the recent past and see how the company has been doing. 

Finding the silver lining 

It was pretty clear that Amazon had been one of the pandemic’s success stories after its 2020 results. Across the whole of 2020, there was a 38% increase in net sales to $386.1bn. Net income almost doubled, reaching $21.3bn. At the end of the third quarter, however, it pointed to new or greater challenges. Primarily, labour scarcity, increased wages, global supply chain bottlenecks and increased costs for freight and shipping. Net sales were up 15% to $110.8bn, year-on-year, and quarterly net income was $3.2bn, substantially lower than the $6.3bn a year earlier.

Founder Jeff Bezos, one of the world’s richest men, said in his staff memo announcing his farewell: “If you do it right, a few years after a surprising invention, the new thing has become normal. People yawn. That yawn is the greatest compliment an inventor can receive. When you look at our financial results, what you’re actually seeing are the long-run cumulative results of invention. Right now I see Amazon at its most inventive ever, making it an optimal time for this transition.”

In came former Amazon Web Services CEO Andy Jassy on 5 July 2021, the 27th anniversary of Amazon’s incorporation. Bezos, later that month, briefly went into space on the New Shepard rocket developed by his Blue Origin.

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Delivering market-pleasing results

When Amazon’s latest results were announced on 3 February, the sales growth of 9% and net sales of $137.4bn put Amazon on the high side of its guidance, which forecast 4% to 12% growth and $130bn to $140bn net sales in the fourth quarter.

In a statement, Jassy discussed the ups and downs for the period:

“As expected over the holidays, we saw higher costs driven by labor supply shortages and inflationary pressures, and these issues persisted into the first quarter due to omicron. Despite these short-term challenges, we continue to feel optimistic and excited about the business as we emerge from the pandemic.”

Jassy said "there's a lot to look forward in the months and years ahead," including the addition of marquee attractions like The Lord of the Rings: The Rings of Power and Thursday Night Football.

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The company’s overall profit in the quarter increased to $14.3bn, compared with $7.2bn a year earlier. Free cash flow for the year decreased to an outflow of $9.1bn, compared to an inflow of $31bn a year earlier. Operating cash flow was down 30% for the trailing 12 months, to $46.3bn. Investment in electric vehicle maker Rivian played a pivotal role in the balance sheet. Investors liked what they saw, but Amazon Prime subscribers will be less-enthusiastic: Membership will increase by $20 to $139. Amazon also hiked rates by $20 in 2014 and 2018.

In the post-results earnings call with analysts, Amazon CFO Brian Olsavsky listed many of the challenges and the additional operating costs due to labour and inflation, totalling more than $4bn.

“Inflation primarily relates to wage increases and incentives in our operations, as well as higher pricing from third party carriers supporting our fulfillment network,” he said. "Last productivity and network disruptions were driven primarily by labour capacity constraints, to the challenges and staffing up our facilities for peak stripping, but the very tight labour market in the second half of 2021. And, more recently, by the emergence of the Omicron variant, we do expect these cost challenges to persist into Q1 (first quarter).”

Interestingly, it was in Jassy’s former division that Amazon saw some pretty positive results. Amazon Web Services revenue grew 40% to $17.78bn, from $12.74bn a year earlier. The company’s overall headcount reached 1.6 million, a doubling over the past two years.    

In other news, at warehouses, AMZN ended the mask mandate in early November for workers fully vaccinated. On the topic back to office for corporate jobs, Jassy announced in October the company would “leave this decision up to individual teams,” rather than specifying a baseline of three days a week in the office.

Market responds in record fashion 

The market was giddy, to say the least, with the fourth quarter report. Amazon surged 13.5% on 4 February, lifting its market capitalisation by a whopping $190bn – a record one-day value gain that beat Apple’s $181bn on 28 January. Amazon is now valued at $1.6trn, which is in fourth place among the highest-valued Wall Street tech stocks.

What the experts say

Experts still think Amazon will continue to develop. When CNN Money asked 43 analysts to make an Amazon stock forecast, the median AMZN stock price prediction was $4,000. The highest of the Amazon stock predictions was $5,000. Remarkably, the most pessimistic forecast saw it going to $3,473.

When it came to analysts’ recommendations, 43 out of 52 experts polled by CNN gave Amazon a buy status, seven said it would outperform expectations, and two said people should hold for now. Interestingly, no one suggested it would underperform expectations, or that people should sell their stock. 

FAQs

Is Amazon stock a buy?

Potentially it is. Remember, though, that any Amazon stock price prediction may not always end up being accurate. You should do your own research, remember that prices can go down as well as up, and you should never invest more money than you can afford to lose. 

Will Amazon stock split?

Although there was some speculation that new CEO Jassy could lead to the first split in Amazon stock since 1999, there was no announcement of a split in the latest quarterly report. There could be added pressure to do so, after Alphabet announced a split.

Can Amazon stock hit $10,000?

There is nothing to say that it cannot hit $10,000 given time but, to be honest, it is not going to happen just yet. When we consider that the most optimistic Amazon stock price prediction sees it hitting $5,000 in a year’s time, it seems safe to say that the Amazon share price is not going to break through the $10,000 barrier at any point in the immediate future.

How to buy Amazon stock?

You can trade Amazon shares today in tokenised assets at Currency.com. Tokenised assets are crypto derivatives whose value is linked to the value of a particular asset. 

Currency.com offers the opportunity to buy with leverage, with easily defined stop-losses, and limits to close positions at a specified price. But while leverage will allow you to make bigger profits if a stock goes up, it will also magnify your losses if the price goes down.

Further reading

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