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Amazon Stock Looks Crazy Expensive – Here’s Why It Still Has Upside

Last Updated September 23, 2020 1:49 PM
Stephanie Bedard-Chateauneuf
Last Updated September 23, 2020 1:49 PM
  • Amazon stock has hit a new all-time high as demand surges.
  • Online shopping is getting more popular because of the pandemic.
  • AMZN is getting expensive, but don’t think its upside potential has vanished.

On Tuesday, Amazon stock  hit a new all-time high. The stock soared roughly 5% to go slightly over $2,275.

The company just announced that it would hire 175,000 people to meet increased demand, which has likely helped to boost the stock.

amazon stock
Amazon stock recorded a new all-time high on Tuesday, even as the overall market remains well off its peak. | Source: Yahoo Finance 

Why Amazon Stock Is Benefitting from the Pandemic

The unprecedented health crisis we are facing will likely change consumption habits long after the coronavirus pandemic is over. It will probably take months for people to feel comfortable returning to large gathering places like grocery stores and shopping malls.

Amazon is in an enviable position to take advantage of these changes in shopping habits. People are turning to online shopping to meet their needs as stores are closed.

As a recent Jefferies survey revealed , Amazon is the only retailer among the major e-commerce companies the Wall Street firm covers (including eBay, Chewy, and Etsy) where customers are spending more money since the coronavirus outbreak began.

The E-Commerce Company Is Struggling to Keep up with Demand

A record 16.8 million Americans have sought jobless  aid in the past three weeks. And Amazon is one of the rare companies to hire workers amid the pandemic.

The retail giant has announced plans to hire 175,000 new employees  over the past month, bringing its entire workforce to 973,000. There were only 33,700 Amazon employees in 2010.

This influx of workers in its distribution and delivery centers  will allow the company to deliver essential – and non-essential – supplies to a nation paralyzed by the coronavirus.

While the higher demand is increasing sales, Amazon is struggling to keep up with the growing demand for its online shopping service. The company has temporarily stopped accepting new grocery customers, while Prime subscribers have complained about infuriating shipping delays.

Amazon said in a blog post that it recently increased order capacity by 60% in the past few weeks  and is adding more.

Amazon Stock Is Getting Expensive – But It Still Has Upside

Amazon shares have soared nearly 20% year-to-date. With a P/E of 88.78 and a five-year PEG of 1.57, shares are expensive.

Amazon is hitting an all-time high as demand is surging. | Source: Yahoo Finance 

Yet of the 47 analyst recommendations tracked by Yahoo Finance , 43 still maintain a buy rating on Amazon stock.

Analysts anticipate an average of $334 billion in revenue in 2020 (against $280.5 billion in 2019, an increase of 19%).

Demand will likely continue to be high post-coronavirus, but investors should expect that some customers might prefer to go back to brick-and-mortar stores.

So the stock price should continue to rise, but it will likely be at a slower pace.

Disclaimer: This article represents the author’s opinion and should not be considered investment or trading advice from CCN.com.