Amazon.com, Inc. (NASDAQ:AMZN) is trading lower on Wednesday morning despite an incredible outlook on its future. MKM Partners analyst Rob Sanderson says that each Amazon share should be worth around $1,275 in just twelve months time. On August 9th shares opened below $1000.
That price target is the highest on Wall Street. Sanderson went even further than that, however. In his report, excerpts of which are quoted below, he comes up with a tweak to model the particulars of a Bezos-based valuation. The numbers that he comes up with would make any shareholder’s mouth water.
MKM Partners pumps Amazon stock
Mr. Sanderson wrote, “Both its primary end markets, retail and computing are being redefined by technology advancement, the company is a dominant disruptor in both segments and each opportunity is massive with only single-digit penetration.”
Because MKM doesn’t think that the firm will show big earnings any time soon, Sanderson prefers “valuing the business on earning potential.” Practically that means “applying a shorter discount period to higher estimates.”
The really bullish part of the analysis comes when MKM’s team pushes it into the more distant future. According to their forecasts, Amazon.com, Inc. (NASDAQ:AMZN) stock will be worth $2,010 in the year 2021.
Amazon price targets keep rising
This isn’t the first major price target raise that Amazon has seen recently. After the firm’s most recent earnings report, at which it announced a failure to meet earnings forecasts from Wall Street, analysts actually got more bullish on the firm.
Right after the earnings miss, Aegis Capital boosted its price target by $102 to $1,171. Victor Anthony, the analyst who authored that report, said “Buy the stock for the share gains in retail, strong AWS growth and overall company margin expansion overtime despite heavy investments.”
Despite the ringing endorsements from research houses, investors punished Jeff Bezos for the earnings miss. Given the relative size of the miss, however, it might have gotten off easy. Stock in the firm is now trading at about 10 percent below its all time high.
What can stop Amazon now?
The Amazon.com, Inc. (NASDAQ:AMZN) bull thesis is based on the idea that the firm is an unstoppable force. The firm doesn’t earn any money because it’s constantly expanding. Once it wants to, say the bulls, the firm’s executive team will be able to inflate profits massively.
One thing that could stop Amazon, of course, is the US government. The firm has its critics among both of the biggest political parties in the country. Whether or not those criticisms could translate into action is still broadly unknown.
Doug Kass, a veteran short seller, thinks that the state will be the ultimate power that puts an end to the preeminence of Amazon. He says that there’s rumblings in Washington about bringing the firm to task for its massive market power.
At the same time the Democratic Party platform heading into the 2018 mid terms is likely to include a call for redefining monopoly power. That change in definition would almost certainly be negative to Amazon.
It’s hard to know what the future holds for Amazon.com, Inc. (NASDAQ:AMZN). Though Sanderson’s $2000 price target could be right, he could be way off if a more powerful force intervenes in the firm’s future. That’s something all Amazon shareholders should be wary of.