Amazon Stock Forecast: Amazon To Power To Greater Heights

omriOmri Elani is a Junior Business Developer & Research Analyst for I Know First. Also a frequent contributor to the investment research website  Seeking Alpha.

 

Amazon Stock Forecast

Summary:

  • Amazon-Logo-300x109Will Amazon be the first company to reach $1 trillion in market cap?
  • The success of Amazon’s, Amazon Web Services.
  • Amazon to take control of its own logistics.
  • I Know First algorithm is currently bullish on AMZN stock

Amazon vs Wallmart

The electronic commerce and cloud computing company, Amazon, which is based in Seattle, Washington is once again outpacing its own achievements and looks to be infinitely growing. Amazon, who surpassed Walmart as the most valuable retailer in the United States by market capitalization, is looking to make history once more. The firm is on the path to reach a market capitalization of $1 trillion, with its Web Service being a primary contributor to this. Moreover, the firm looks to diversify itself into the logistical sector and thus giving it control over its own carrying channels. The success of Amazon has even lead to some predicting that the e-commerce giant will reach a share price of $1,000 by the end of 2017. Although, some have raised suspicion over this valuation, and have linked the sales of more than 1 million shares of Amazon stock, by CEO Jeff Bezos earlier this week as pre-determined.

The firm’s, shares appear to be on a constant rise and, with the reasons highlighted in this article, it is likely to be a beneficial long-term asset to add to one’s portfolio.

AMZN shares are priced at 709.92$ at the time of writing. Below is a chart which shows AMZN impressive stock price increase for a 5 year period.

amazon stock forecast

(Source: Bloomberg)

Will Amazon hit $3 Trillion by 2026?

Earlier this week, the founder and CEO of Venture Capital (VC) firm Social Capital has unleashed an optimistic yet realistic estimation for Amazon’s market capitalization at the Ira Sohn investment conference in New York.

Chamath Palihapitiya, the CEO of the VC, suggests that the company would be worth 10 times more than its current $300 billion market capitalization and exceed $3 trillion.

He states: “If you believe in the Internet you have to believe in Amazon,” he continued “If you believe in buying things you have to believe in Amazon.”

Palihapitiya estimates that Amazon’s gigantic retail business alone will be worth $1 trillion as demonstrated by the number of units sold which grew from 30 billion a year from 6 billion last year. Moreover, the company’s web service is also cementing itself as the monopoly of internet storage and cloud sharing. Palihapitiya, argues that by 2025 the company will post revenue of $432 billion at a 30% EBIT margin.

Palihapitiya believes CEO Jeff Bezos will reinvest much of the cash gained by these businesses in high-growth opportunities, this reinvestment will spur another $500 billion to the value.

On the other hand, this would mean that Amazon will need to maintain its sales pace of the last ten years, and also see its valuation stay the same, which is uncertain.

Currently, Amazon trades with a market cap of roughly $316 billion, a figure that would need to increase ten-fold in the next decade to hit that $3 trillion mark. Many are certain Palihapitiya estimation would come true as Amazon’s stocks already climbing 1,800% over the last ten years.

Amazon CEO Jeff Bezos has done an incredible job expanding the company over the years.

amazon stock forecast

(Source: https://www.ycharts.com)    Amazons revenue growth

Amazon has grown its revenue from 2006 through 2015 at a compound annual growth rate of almost 26% as seen above. An impressive, achievement and if continued, it will indeed achieve its $3 trillion milestones. However, Amazon will have to continue growing sales at the vigorous pace it is currently doing so.

 

Amazon Web Services

Amazon Web Services (AWS) was launched roughly 10 years ago. It was one of the pioneers in the cloud computing sector. CEO, Jeff Bezos, described it at the time as a “tiny seed“. That tiny seed has become extremely fruitful with AWS sales for the unit on pace to reach $12.5 billion for the year, based on first-quarter results.

Moreover, Bezos has orchestrated the cloud computing service to be the leader in the market capturing 31%. Followed by Microsofts (MSFT), IBM, Alphabets Google Cloud Unit, and Salesforce.com. As seen in the bar chart below.

amazon stock forecast

(Source: https://www.businessinsider.com)     Cloud Service’s Market Share

 

“This year, Amazon became the fastest company ever to reach $100 billion in annual sales,” Bezos said to his shareholders in early April, reflecting on the 2015 fiscal year. “Also this year, Amazon Web Services is reaching $10 billion in annual sales, doing so at a pace even faster than Amazon achieved that milestone.”

The service lets users store, network and share software all via an online cloud.

In the first quarter, the unit had sales of $2.56 billion, up 64% year over year, compared with 28% growth in total company sales. AWS comprises 15% of total sales for the period, up from 11.7% a year ago. Below we can see the exception growth in revenue that AWS has achieved over the past year.

amazon stock forecast

(Source: http:///www.investors.com)                AWS revenue growth

Many argue that amazon’s highest sales growth in nearly four years was due to AWS massive demand.

Amazon & Logistics

Earlier this week, Amazon agreed to establish a partnership with the aircraft leasing company Atlas Air Worldwide Holdings. The deal is the second investment this year in an air cargo airline and cements the idea that Amazon wants take control of its own logistic business.

The deal came after Amazon reached a similar deal in March, in which it planned to shuttle merchandise around the U.S. using as many as twenty 767s from Air Transport Services Group.

The partnership with Atlas Air will allow Amazon to lease aircraft on long-term contracts ranging from 7 to 10 years. Moreover, Amazon has also been granted warrants to acquire 20% of AAWW’s common stock.

Atlas Air said on Thursday that Amazon can take a seat on its board when Amazon exercises warrants for an initial 10% stake in the air cargo operator.

Similarly, the online retailer had said in March it would work to secure warrants giving it almost 20% of Air Transport Services equity and a board seat. Those warrants were priced at $9.73 per share over five years.

Dave Clark, Amazon’s senior vice president of worldwide operations, said the agreement would “support package delivery to the rapidly growing number of Prime members who love ultrafast delivery.”

The agreement is expected to begin in the second half of the year and continue to ramp up through 2018.

Although some are skeptical that this is not the right move for Amazon. As this new push into logistics is completely out of the firm’s threshold and is uncharted territory. This vertical integration, shifting Amazon into the air transport business requires a completely different managerial structure and experience, which Amazon does not have, thus making the decision potentially not so fruitful.

amazon stock forecast

 (Source: http://www.atlasair.com) –                         Atlas Air Plane

 

Analysts Opinion

The company’s stock prices are currently valued at a phenomenal price of 709.92$. According to data provided by Thompson/first call, analysts are still very optimistic about AMZN’s future, the mean target price is $793.26 and the median target price is $800.00.

Moreover, it is important to note that the men recommendation for the past two weeks sits at a favorable value of 1.8.

amazon stock forecast

(Source: Yahoo finance)

Analysts recommendation trends suggest predominantly to buy the stock. 12 analysts suggest to Strong Buy and an astonishing 28 analysts recommend to Buy, with 5 analysts suggesting to hold the stock.

amazon stock forecast

(Source: Yahoo finance)

Conclusion

Amazon today dominates two huge categories, the e-commerce category as well as their cloud service. The retail company is likely to be the first enterprise technology company to make its $3 billion within 10 years, faster than Oracle and faster than Apple. With such exceptional potential, we think the company has the stock does currently seem undervalued and one which is likely to produce fruitful returns in the future.

With so much on the horizon, the I Know First is bullish on this stock in the long term, with a bullish algorithmic forecast to support the fundamental analysis of AMZN.

Forecast:

I Know First is a FinTech company that created an advanced state of the art algorithm based on artificial intelligence and machine learning to foresee market performance for more than 3,000 markets including stock forecasts, world indices, commodities, interest rates, ETFs, and currencies. In essence, the algorithm generates a with a signal and a predictability indicator. The signal is the number at the center of the box. The predictability is the figure at the bottom of the box. At the top, a particular asset is identified. This format is standardized across all forecasts the results of these predictions are shown on a daily basis on the I Know First website.

I Know First has a bullish forecast on AMZN for the three- month and one-year forecast.

In this stock forecast, we can observe that AMZN had a signal of 50.95 and a strong predictability of 0.2 on May 15th, 2016 for the 3-month forecast and a signal of 213.65 and a predictability of 0.22 for a 12-month forecast.

amazon stock forecast

Past Predictions

In the past, I Know First has predicted correctly the bullish signal for AMZN stock movement, as seen in the forecast from May 6th, 2016. AMZN had a bullish signal of 6.61 and a strong predictability indicator of 0.09 managing to bring decent returns of 6.67% in just four days.

amazon stock forecast


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