Amazon Stock Prediction: Two Reasons Why Amazon’s Stock Will Stay Above $1000

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The article was written by Motek Moyen Research Seeking Alpha’s #1 Writer on Long Ideas and #2 in Technology  – Senior Analyst at I Know First.

Amazon Stock Prediction


  • There are 80 million Prime subscribers and they fuel Amazon’s double-digit annual revenue growth. Most Prime subscribers are upper or middle-class citizens.
  • Bezos now wants to go after lower-income households. Amazon is offering a discounted $5.99/month Prime membership to those who are on government assistance.
  • Prime membership is all about building long-term loyalty from its customers. Even low-income people are worthy Prime subscribers.
  • Amazon has also been lending $1 billion to third-party vendors who sell goods on its online marketplace.
  • Helping third-party merchants succeed also benefits Amazon.

Amazon’s (AMZN) stock beat Alphabet (GOOG) in the race to the $1,000 price level. My fearless forecast now is that AMZN will stay above $1,000 for the whole of June. Unlike the advertising-focused business of Alphabet, Amazon is not vulnerable to the rising use of ad-blocking software on desktop and mobile devices.

AMZN therefore is likely to outperform GOOG and GOOGL for the rest of the year. GOOG and GOOGL have around +27% YTD return, but AMZN is outpacing them with its +34.7% YTD return.

(Source: Google Finance)

Why Amazon Is So Highly Valued

Other investors perceive Amazon as overvalued because of its 189x P/E valuation. However, Amazon’s ace is its loyal army of 80-million strong Prime subscribers in America. Those 80 million repeat customers fuels Amazon’s double-digit growth. Prime subscribers spend an average of $1,300 shopping on every year, almost double that of the $700 average annual spend of non-Prime members.

(Source: Statista)

Prime subscribers contributed to the 23.15% CAGR in Amazon’s revenue from 2012 to 2016. They are also partly responsible for AMZN’s 5-year return performance of +362.41%. Momo tickers like AMZN are valued on how fast they can grow their annual sales. As long as AMZN keeps posting 20% or higher annual revenue growth, it will remain above $1,000.


Prime Membership For Low-income People

Investors should therefore rejoice when Amazon makes moves that attracts more people to join its Prime membership program. Amazon is offering a discounted $5.99/month (original price is $10.99) Prime membership package to those who are under government assistance. In short, Amazon is now targeting the lower-income households. The current majority of Prime members are middle and upper-class citizens.

The $5.99/month Prime package targets the low-income households in the United States. This move could add 10 to 15 million new members to the 80 million U.S. Prime subscriber-count. Ten million people who spend $700 to $1,000 annually on Amazon, adds up to $1 billion in new revenue.

The 10 million new Prime subscribers are also new 10 million pairs of eyes for Amazon’s advertising business. Amazon is therefore smart going after the low-income people. They don’t have the same online shopping power of middle-class citizens but they still offer growth for Prime subscriptions.

The Second Reason Why Amazon Will Keep Growing

Amazon charges a monthly subscription fee or a flat per-item commission rate to third-party vendors who sell on its online marketplace. It is therefore not a surprise to learn that Amazon lent $1 billion to more than 20,000 third-party merchants on its e-commerce site. The success of these vendors also benefits Amazon.

Amazon giving small loans to third-party merchants builds up long-term loyalty. Amazon also gets a cut from every item that third-party merchants sell on Amazon’s site. Amazon also charges a fee if a third-party merchant hires it to fulfill orders. Some third-party merchants also pay Amazon to get a higher ranking on product search results.

As per Statista chart below, third-party merchants contributed $22.99 billion to Amazon’s FY 2016 revenue. There are worthy allies that deserve help from Amazon. Amazon charges 6-11% on the loans it makes to third-party merchants, it’s therefore a symbiotic relationship.

(Source: Statista)

Amazon can afford to lend $1 billion to its partner merchants. It has $22.9 billion in cash & equivalents. I look forward to Amazon doubling its lending program to $2 billion this year.


Do not be worry about AMZN’s ultra-high valuation. This stock will slide sideways at the $1,000 price level. It has little chance of going down below $900. My own fearless forecast is that AMZN could even breach $1,100 within the next three months.

The 3-month algorithmic forecasts from I Know First are still positive for AMZN. I completely trust the Artificial Intelligence-enhanced forecasts of I Know First so yes, AMZN is still a buy right now.

I Know First Algorithm Heatmap Explanation

The sign of the signal tells in which direction the asset price is expected to go (positive = to go up = Long, negative = to drop = Short position), the signal strength is related to the magnitude of the expected return and is used for ranking purposes of the investment opportunities.

Predictability is the actual fitness function being optimized every day, and can be simplified explained as the correlation based quality measure of the signal. This is a unique indicator of the I Know First algorithm. This allows users to separate and focus on the most predictable assets according to the algorithm. Ranging between -1 and 1, one should focus on predictability levels significantly above 0 in order to fill confident about/trust the signal.

Past I Know First Success With AMZN

On December 1, 2016, I Know First’s issued a bullish article on Amazon. Increasing sales during the holiday and becoming the leading company in online sales, Amazon looks poised to gain more. Since the article was posted, Amazon shares are up 34.6%.

The positive technical indicators and moving averages trade signals are also very bullish for Amazon.


This bullish forecast for AMZN was sent to I Know First subscribers on December 1, 2016. To subscribe today click here.