Jon Hadad

About the Author Jon Hadad

Jon Hadad graduated from the University of Delaware with a degree in political science. Prior to joining the Smarter Analyst team, he was an industry analyst at a New York research firm.

Amazon (AMZN) Stock Poised for Continued Growth; Here’s Why


While Amazon (AMZN) was founded as an online retailer, there are enormous opportunities the company is pursuing elsewhere. The e-commerce giant continues to branch out into other parts of business, including its growing Web Services division, logistics arm and advertising network. A few days ago, it was reported that CEO Jeff Bezos told employees he was “very excited” about the auto industry, after the company invested in EV startup Rivian. Furthermore, Amazon recently crossed the billion-dollar mark of private investments for the first time since it began reporting in 2015, indicting investment in non-Amazon businesses is up big.

With that in mind, Cowen analyst John Blackledge remains bullish on Amazon stock at these levels, as he reiterates his Outperform rating with a $2,400 price target. If the price target is reached within 12 months, that would provide a 12-month return of nearly 28%. (To watch Blackledge’s track record, click here)

After talking to consultants and ex-Amazon employees, with “color [being] largely positive,” Blackledge likes Amazon’s stock heading into the second half of the year.

Amazon’s one-day shipping for Prime is a notable development for Blackledge, who says this signals “Amazon has been building their logistics offering for faster shipping speeds,” which should “help drive higher customer conversions and unit growth, boosting sales growth.” It also sends a message to USPS, UPS and FedEx, that Amazon will not rely on them forever, as the company continues to invest in and grow its logistical capabilities.

On advertising, Blackledge says his experts’ Amazon clients are “spending notably more y/y,” which is helping contribute to Amazon’s growing ad business. The analyst says Amazon allows “clients [to] correlate advertising to sales in real-time, which is a driver of rising ad spend” and an advantage of Amazon. Blackledge estimates ad revenue at about $13 billion for this year, or 42% higher than last. In the next five years, the analyst estimates ad revenue to grow to $34 billion. Blackledge noted, “Our experts are now essentially mandating a certain level of AMZN ad spend in their clients’ contracts. As of late last year, Amazon effectively rebranded its various ad businesses (AMG, AMS, AAP) under “Amazon advertising.” Our experts mentioned that within AMG, where AMZN manages display advertising campaigns both on and off AMZN, among other branding products, the company has introduced more entry level products at ~$10K/month with more and better tracking vs. prior entry of ~$50k/month, which is driving adoption by 3P sellers.”

All in all, with a diversifying stream of revenue and dominance in the fast-growing e-commerce market, Wall Street has many reasons to love Amazon. TipRanks analysis of 34 analyst ratings on the stock shows a Strong Buy consensus, with all 34 analysts recommending Buy. The average price target among these analysts stand at $2,226.88, which represents about 20% upside. (See AMZN’s price targets and analyst ratings on TipRanks)

 

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