A jump in e-commerce this year has been great for Amazon shares. That trend, as well as the growth in AWS, looks likely to continue.
Over the past year, shares of Amazon (Nasdaq: AMZN) have climbed 43 percent. Its online retail operations have been seen as a huge beneficiary during the time of quarantine.
But the party may not be over yet. With shares closing in on $2,500, RBC has upped its price target on the company to $3,300 per share. That’s the highest target limit yet on Amazon shares from a Wall Street bank.
With a current market cap of $1.4 trillion, Amazon is already one of the world’s largest companies. It’s also one of the largest players in the Nasdaq Index, vying with Apple for the top spot.
Sounds insane, doesn’t it? But the numbers tell a different story. A move to $3,300 from its current price near $2,500 would tack on another 32 percent gain.
Based on the returns of the past year… or even five years… that would be a slowdown.
But at that price, the company’s market cap would top $1.6 trillion, vaulting it well past the valuation of Apple.
On that jump in price, company founder and CEO Jeff Bezos would likewise see his fortune rise even more. He’s already the world’s wealthiest man, with a net worth right around $150 billion right now.
A 32 percent jump on that would take him to just over $195 billion. It isn’t a stretch of the imagination to see his net worth hit $200 billion within the next few years.
RBC set its price target for shares on the growth of e-commerce at Amazon this year. The shift to online shopping accelerated amidst the Coronavirus outbreak and lockdowns around the world.
The growth in Amazon Prime membership is also a catalyst for further growth.
The only downside? RBC did note that the company was seeing a decline in customer satisfaction.
Typically in the past, as e-commerce has grown as a percentage of all retail activity, it hasn’t dropped back down. Some analysts see traditional retail making a comeback as quarantine restrictions end, while others see a permanent change. Based on history, these gains will likely hold.
While that’s been the company’s initial business and what most investors know, Amazon has been building up other services as well.
Amazon Web Services (AWS) has been a huge provider of cloud storage solutions to both the private sector and the government.
Like an Amazon Prime membership, these services create recurring revenues, which makes cash flow more predictable for a company.
Historically, investors have had mixed feelings about Amazon, as its cash flow and profitability have been erratic.
Factoring in the growth of AWS on top of the e-commerce trends, and a $3,300 price point doesn’t seem out of the realm of possibility for already high-flying Amazon shares.
The question isn’t whether or not Jeff Bezos will become the first human to hit a $200 billion net worth. It’s simply a question of when.
Disclaimer: The opinions expressed in this article do not necessarily reflect the views of CCN.com. The above should not be considered investment advice from CCN.com. The author holds no investment position in AMZN at the time of writing.
Last modified: September 23, 2020 1:59 PM