AMZN’s Road to $1,800
January 29, 2018
Amazon (AMZN) is a juggernaut for a lot of reasons, one of the main ones being its amazing vison and ability to get out in front of burgeoning categories – or simply create them. We’ve seen it move into the retail space, and we’ve also seen potential competitor’s share prices tank on the smallest of rumors that the company might expand into a new sector. Businesses are scared of Amazon, but we as investors can appreciate all it has going for it.
Let’s talk about those factors today.
Financial Execution: AMZN posted earnings of $0.52 a share in the third quarter, crushing the Street down at $0.02 and leaving the experts with their jaws dropped and frantically erasing all prior assumptions and sharpening their pencils.
Top-line growth continues at a breakneck pace around the world – sales were up 34% in North America and 29% internationally – but it was the profitability of the company’s cloud business that is well ahead of most assumptions.
The Cloud: Amazon Web Services (AWS) does face competition, but the simple fact is that the cloud computing space is dominated by AMZN. And I expect it to maintain strong market share for the foreseeable future.
It’s all about the company’s digital personal assistant Alexa, which now boasts 25,000 skills including the ability to distinguish between two voices. That’s pretty cool. In fact, consumers’ ability to access Alexa via Echo – a voice-controlled speaker system – helped propel the Echo Dot to one of the top-selling items this Christmas shopping season.
Digital personal assistants are hot right now, and there are estimates that 1.2 billion of these kinds of devices will be sold in 2020. And once in place, they’ll become the ultimate data collecting machine and also the best salesperson in history, taking current share away from mobile.
Retail: AMZN has already bought Whole Foods Market (WFM) and rolled out a cashless store, and I recently enjoyed shopping at an Amazon brick-and-mortar bookstore that opened on the footprint of an old Borders.
Then there’s the new headquarters, which management is currently on the cusp of wrangling the most generous offer for. They’ve narrowed it down to 20 cities in the U.S. and Canada so far. Ultimately, this will generate billions of dollars in construction spending and jobs.
Stock: As I mentioned, this stock is a juggernaut and it has clearly reflected internal developments at the company aside from the occasional bump in the road or pullback in sympathy with broader market action. AMZN has been in an uptrend for years and I expect the trajectory to continue higher. In fact, I think it has a date with $1,800 sometime in 2018 or early 2019.