Amazon stock forecast: Is Amazon a good buy?

With a new chairman in place, it was time for an Amazon quarterly update and time for a new Amazon price forecast, too.

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, 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. 

A good pandemic?

When the 2020 year end results were announced earlier this year, it was pretty clear that Amazon had been one of the pandemic’s success stories. Across the whole of 2020, there was a 38 per cent increase in net sales to $386.1bn. Net income almost doubled, reaching $21.3bn. However, those incredibly impressive results were overshadowed by the news that the company’s founder and CEO Jeff Bezos was going to step down from his role later on in the year. In an email to Amazon staff at the time, Bezos, one of the world’s richest men, said he was proud of everything Amazon had achieved, saying: “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.”

Bezos left his position as CEO to serve as Amazon’s executive chairman on 5 July, the 27th anniversary of Amazon’s incorporation. While the founder took advantage of his lesser day-to-day responsibilities by taking off in his own New Shepard rocket and flying into outer space, it was former Amazon Web Services CEO Andy Jassy who took control of the company.

Amazon.com Inc
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3417.29
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High: 3436.31

Quarterly results: slowing down

When Amazon’s results  for the second quarter of 2021 were announced on 29 July, there were definite signs of a slowdown. Although there was a 27% growth in sales, that was down year-on-year from the 41% growth posted in the second quarter of 2020. The company also said it only expected a maximum growth of 16% in the third quarter. 

The company’s overall revenue was $113bn which, according to Reuters, was lower than the $115bn forecast by analysts Refinitiv. However, the same analysts predicted that Amazon’s earnings per share would stand at $12.30 when they actually stood at $15.12, representing good news for both shareholders and the Amazon stock forecast.

In a statement, Jassy said: Over the past 18 months, our consumer business has been called on to deliver an unprecedented number of items, including PPE, food, and other products that helped communities around the world cope with the difficult circumstances of the pandemic. At the same time, AWS has helped so many businesses and governments maintain business continuity, and we’ve seen AWS growth reaccelerate as more companies bring forward plans to transform their businesses and move to the cloud.
“Thank you to all of our passionate, innovative, mission-driven employees around the world for continuing to stay focused on delivering for customers. I am very excited to work with you as we invent and build for the future.”

The company’s overall profit in the quarter rose to $7.8bn, up by 48%, while its free cash flow stood at $12.1bn, down year-on-year by just over 61% from $31.9bn. However, operating cash flow went up 16% from $51.2bn to $59.3bn.

In a post-results press call with CNBC, Amazon CFO Brian Olsavsky said that it was going to be difficult to replicate the results it had in the second quarter of 2020, where growth rates stood somewhere between 35% and 45%. 

He said: “We’re starting to lap that and that’s why you see some of the growth rate coming down.

“Our customers are safe and healthy and ordering from us. And we know that there’ll be more vacations or be more mobility. There’ll be things that probably people shied away from last year and that’s all good, but it does tend to lead them to do other things besides shop. So we’re just adjusting our run rates in the period that we see that happening.”

Interestingly, it was in Jassy’s former division that Amazon saw some pretty positive results. Amazon Web Services revenue grew 37%, up from the previous quarter’s 32% to $14.81bn. The company also saw a year-on-year increase in staffing levels, hiring a further 52% to help deal with increased demand during the pandemic to see a total of 1.33 million people work for Amazon.    

In other news, the company said it had no plans to halt bringing staff back into offices in September, despite the new delta variant of COVID-19. Although it has been reported that other big tech firms like Facebook and Google will be looking at making sure only fully vaccinated staff return in house, Olsavsky said that the company would not be asking staff to have their jabs, according to CNBC.

Market response

The news from Amazon was greeted with some caution by the stock markets. When the markets closed on 29 July, the Amazon share price stood at $3,599.92 but when they reopened after the quarterly results were announced on July 30, the Amazon stock price had dropped down to $3,344.07. That is a fall of more than 7% overnight. Clearly, it looked like Amazon’s predictions of a slowdown in growth meant that some traders were less keen on getting involved with the retail giant.

What the experts say

Despite the caution about overall slow growth, the experts still think Amazon will continue to develop. When CNN asked 45 analysts to make an Amazon stock forecast for 2021 and the first seven months of 2022, the median Amazon stock price prediction was $4,200, or a rise of about 25.6% from current levels. The highest of the Amazon stock predictions was $5,500, up more than 64% while, remarkably, the most pessimistic forecast saw it rise by 12.88% to $3,775.

When it came to analysts recommendations, out of 50 experts polled by CNN, 41 said Amazon had a “buy” status, six said it would outperform expectations, and three said people should hold for now. Interestingly, no one suggested it would underperform expectations, or that people should sell their stock. 

FAQs

Potentially it is. However, it is worth noticing that the price did fall when the company said its growth would slow down, even if most analysts appear to put it on their buy list. 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. 

Although there was some speculation that a new CEO could lead to the first split in Amazon stock since 1999, there was no announcement of a split in the latest quarterly report, so the answer is "almost certainly not".

There's nothing to say that it can't hit $10,000 given time but, to be honest, it isn't going to happen just yet. When we consider that the most optimistic Amazon stock price prediction sees it hitting $5,500 in a year's time, it seems safe to say that the Amazon share price isn't going to break through the $10,000 barrier at any point in the immediate future.

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.

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