Wall Street betting Amazon stock to soar past $4,000 in next year

Two days after Congress grilled Amazon on whether it was too big, Wall Street is cheering on the retail behemoth, predicting its very size and market dominance will push its stock to stratospheric heights.

Analysts are raising their target prices for Amazon stock after the e-commerce giant posted blockbuster revenue for the three months from April to June and outlined further plans to expand as the coronavirus recession makes it an increasingly essential part of consumers’ shopping and entertainment lives.

Amazon is “checking every box to drive outperformance,” UBS analyst Eric Sheridan wrote in a note Friday, predicting that the company would add $1,000 to its share price within the next year, passing $4,000. (Amazon shares closed Friday up nearly 4% to almost $3,165.) Goldman Sachs’ Heath Terry raised his target to $4,200, a price that would make Amazon’s total market value worth more than the entire Russell 2000 index of small-cap stocks, as Twitter pointed out.

Analysts at Wedbush and Credit Suisse also raised their targets. So did Morgan Stanley and JPMorgan, according to The Street.

The chief reason for the enthusiasm? After a record-setting quarter in which home-bound consumers flocked to Amazon for everything from household goods to entertainment, Wall Street expects the company to expand its market dominance even further.

“Looking behind the current dynamic driven by ‘shelter in place’, we still see Amazon being the beneficiary,” UBS’ Sheridan wrote. As more Americans adopt smart speakers, online shopping and cloud computing, all areas in which Amazon dominates, the company will continue to prosper, he explained.

Stock up 63% since March 1

Neil Saunders, managing director at GlobalData Retail, noted that Amazon’s Prime expansion gave it a locked-in base of high-spending customers to count on in the future. 

Goldman’s Terry praised Amazon’s investments in infrastructure and order fulfillment, which he expects will benefit its performance long-term.

Already, Amazon has outperformed its tech peers this year. Its stock price has soared 63% since March 1, gaining value at 12 times the rate of the broader stock market.

That increase has boosted CEO Jeff Bezos’ paper wealth by a cool $68 billion to about $181 billion since the start of the pandemic. If the share price were to hit $4,000, it would add another $45 billion to Bezos’ fortune — in addition to making smaller boosts to the returns of the many retirement funds with Amazon stock holdings.

The flood of money buffeting the ecommerce giant during the pandemic will allow Amazon to build more fulfillment and distribution centers, among other things. The company plans to expand its real estate footprint by 50% this year, an executive said on its earnings call Thursday.

The vast network Amazon commands is precisely what concerns many policymakers. The Economic Liberties Project issued a scathing report this week that describes Amazon as having a stranglehold on much consumer behavior, and Wall Street’s support of the company as “investments in monopoly power.” 

During Wednesday’s hearing before the House Subcommittee on Antitrust, members of Congress asked Bezos pointed questions about the company’s moves to keep consumers within Amazon’s own ecosystem, shut out competitors and seek “market position.”

But Wall Street is clearly unconcerned. During Amazon’s Thursday earnings call (which Bezos did not attend), the antitrust issue went unmentioned — and not a single Wall Street analyst asked about it.

One questioner did invoke Bezos’ name, however, when he asked: “Is Jeff aware of how profitable the company is becoming? Is he happy about it?”