Brokerage Jefferies analyst Brent Thill released a research report last week, stating that Amazon’s (AMZN-US) stock price is expected to reach $5,700 per share in three years, which means a 70% increase and the company’s market value will rise to nearly $3 trillion .
Thill is not making a short-term appeal for the March first quarter’s financial report. In fact, he also believes that Amazon may face challenges in the next few quarters, because the huge growth of the e-commerce business driven by the epidemic a year ago will be a high year-on-year basis.
Amazon’s stock price soared by 90% in the first 8 months of 2020, but fell by 5% in the past 6 months. The recent transaction price was at 3399 US dollars. There are many reasons for the stock price to stagnate. With the popularization of vaccination, the market has higher expectations for the economic restart. It is believed that some consumers should start shopping in physical stores. Although the overall trend towards e-commerce cannot be changed, it is not surprising that the trend has slowed down. .
But in the long run, Thill is still fully supporting Amazon.
The Thill research report pointed out that because more and more companies shift computing workloads to the cloud, Amazon’s AWS is the most valuable business, and its value is expected to grow to $1.2 trillion in three years. In addition to Amazon itself, there are only three other US companies with a market value of more than $1 trillion; Apple (AAPL-US), Microsoft (MSFT-US) and Google’s parent company Alphabet (GOOGL-US).
In addition, he also believes that Amazon’s advertising business has great potential. Three years later, it is expected to be worth more than 600 billion US dollars, making Amazon the world’s third largest advertising seller, second only to Google and Facebook (FB-US).
“As Amazon gradually becomes an important channel for consumer packaging product companies, we believe that part of their spending will shift to search and product configuration. In addition, we think Amazon has the opportunity to expand advertising in new channels such as international and Prime Video.”
He pointed out that Amazon can become a strong advertising company because most product searches start with Amazon, not Google or social media. Consumers visit the Amazon website or enter keywords in the search bar, which makes Amazon advertising very attractive, attracting companies that do not sell items on the platform to also advertise to them, such as travel service companies and car factories.
As for Amazon’s core retail business, Thill estimates that three years later, it will be worth US$1 trillion, of which US$700 billion belongs to the third-party seller business. “Amazon Prime membership and the broad trend towards e-commerce have accelerated growth. We believe this long epidemic has made consumers more accustomed to relying on e-commerce.”
Of course, Amazon is also facing some controversies. For example, the company and other technology giants are subject to strict regulatory scrutiny, and Amazon has overcome the labor union movement of warehouse workers in Alabama. But in essence, Amazon is a rare company that operates three huge and distinctive businesses, each of which is in the early stages of development. If you want to say which stocks are suitable to buy and continue to hold forever, then This is it.