Why Amazon will not be worth $ 1.5 trillion in about 800 days, as this analyst predicts

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Do not be so quick to sell your house and bet all after-tax gains on Amazon's share price (AMZN) reaching $ 3,000 in 800 days or more, as one analyst suggests fundamentally. "data-reactid =" 15 "> Do not sell your house so fast and bet all after-tax gains on Amazon stock price (AMZN) reaching $ 3,000 in about 800 days, as fundamentally suggests a analyst.

Piper Jaffray analyst Michael Olson hit the headlines before Memorial Day claiming that Amazon's share price could reach $ 3,000 between mid-2021 and 24-36 months. This hypothetical move would mark a price explosion of 65% in a stock that is known to have only climbed over time. Amazon's market capitalization, assuming a stock price of $ 3,000, would far exceed $ 1.5 trillion.

"We are confident that Amazon's shares can reach this level without any major acquisitions or other significant changes in the business. An eventual fallout from AWS (Amazon Web Services) would undoubtedly help to highlight the relatively low valuation of other segments, "says Olson, optimistic.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Getting lost in all the hype around this call to shares is a rational discussion of Olson's assumptions about Amazon's activities, and Olson generally expects Amazon's hot growth rates to be known on Wall Street. slow through the council. Yes, slowThis should prompt an investor to wonder why Amazon will not need more time to reach the $ 3,000 mark (if it does so at all). "data-reactid =" 18 "> Getting lost in all the hype around this call title is a rational discussion of Olson's assumptions about Amazon's business.In general, Olson expects rates to of hot Amazon growth are known on Wall Street slow through the council. Yes, slow, which should prompt an investor to wonder why Amazon will not need a longer period to reach the $ 3,000 mark (if it does so at all).

<p class = "canvas-atom web-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Color your real geek stock lifeless, but usually a course significantly higher stock market in a short time comes with by accelerating growth rate for a company. "data-reactid =" 19 "> Color your stock like a lifeless geek, but usually with a significantly higher stock price in a short time. by accelerating growth rate for a company.

But that's not what Olson believes here.

"We assume in particular a multi-year growth deceleration for each major category of Amazon's business, as well as a very minimal adjustment to the multiples of the group of companies, although Amazon's growth is clearly faster than groups in the cloud and advertising segments, "writes Olson.

More

The details are more detailed in Olson's financial modeling. Some quick observations:

• Amazon's growth in North America's retail sales is expected to slow sequentially in each quarter of 2020.

• Amazon's retail operating profit margin in North America is trending downward in 2020.

• The costs of shipping and execution are expected to reach 19.5% and 21.2% respectively in 2020 compared to 2019.

• Total sales growth is expected to fall below 20% – and remain there – after the second quarter of 2020.

• Retail operating margins worldwide increased from 4.9% in 2019 to 4.3% in 2020. At the same time, AWS's operating margins remain unchanged in 2020 at 29%.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "I do not try to hate the prospects of & dquo; Amazon or Olson's work (I appreciate his analysis on Netflix (NFLX)). It's just that big calls like this one have to be carefully considered (like all Wall Street calls). Do not forget that Amazon is entering its next decade with shipping costs likely on a permanent uptrend and increased competition from the formidable rival, Walmart (www.stock-market-today.ccWMT) and target (TGT). "data-reactid =" 40 "> I'm not trying to hate Amazon's prospects nor Olson's work (I appreciate his analysis on Netflix (NFLX).) It's just that big calls like this one should be examined carefully (do not forget that Amazon enters its next decade with shipping costs probably related to a permanent uptrend and increased competition from the formidable Walmart rivals (WMT ) and Target (TGT).

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "" We would not bet against Amazon, "Victoria Fernandez, chief strategist of Crossmark Investments, said on Yahoo FinanceThe first trade. & # 39; Fernandez has no position on Amazon. "Data-reactid =" 41 ">" We would not bet against Amazon, "Crossmaster Investments chief strategist Victoria Fernandez said in Yahoo Finance's" The First Trade. "Amazone.

Yes, it's hard to bet against Amazon at Fernandez's point. Although it is not difficult to consider research like Olson's with greater skepticism than the norm.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Brian Sozzi is an editor and co-host ofThe first trade'At Yahoo Finance. Follow Brian Sozzi on Twitter @BrianSozzi"data-reactid =" 43 ">Brian Sozzi is an editor and co-host ofThe first trade'At Yahoo Finance. Follow Brian Sozzi on Twitter @BrianSozzi

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Read the latest financial and commercial news from Yahoo Finance"data-reactid =" 53 ">Read the latest financial and commercial news from Yahoo Finance

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