Wall Street’s top analysts generally love Amazon (NASDAQ:AMZN) stock, and it’s easy to find reasons to consider owning it now. Yet, the skeptics will point to Amazon’s valuation and say that it’s stretched. Nevertheless, I am bullish on Amazon stock as the company’s growth and willingness to venture into new directions can make Amazon practically unstoppable.
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It’s amazing to think that Amazon started out as an online bookseller. Today, Amazon is mainly known as an e-commerce giant where a wide variety of products are bought and sold.
However, there’s more to Amazon than its e-commerce platform. For instance, Amazon’s cloud division, known as Amazon Web Services (AWS), has been hugely successful. This year, Amazon reportedly has plans to shake up the U.S. telecommunications sector; this could be a real head-turner and a major revenue generator.
Is Amazon Overvalued, and Does It Matter?
When I was young, my general rule of thumb was to be wary of companies with price-to-earnings (P/E) ratios above 30x and downright suspicious of companies with P/E ratios above 50x. Then, Amazon came along, and I was forced to re-evaluate my conception of value.
To this day, I thank my lucky stars that I didn’t short AMZN stock because I thought it was overvalued 10 years ago. Amazon is proof that, in the modern equities market, it’s entirely possible for a company to have a triple-digit P/E ratio and still continue growing at a breathtaking pace.
Over the past decade, Amazon has kept on winning, and the stubborn short sellers have kept on losing. Yes, it’s true that Amazon’s trailing 12-month P/E ratio of 301.01x is many orders of magnitude higher than the sector median P/E ratio of 16.41x. The same thing could be said about Amazon’s price-to-sales (P/S) and price-to-book (P/B) ratios.
Nonetheless, AMZN stock is very likely to continue moving higher, and Wall Street analysts know it. Piper Sandler’s Thomas Champion, for example, reiterated a Buy rating on Amazon and assigned AMZN stock a price target of $150. Meanwhile, Bernstein analyst Mark Shmulik maintained his Buy rating on Amazon and established a price target of $140 on the shares.
Amazon Could Threaten Top Telecoms
My point, in a nutshell, is that betting against Amazon is like standing in front of a steamroller. Amazon’s growth story seems to add a new chapter every few months. Lately, the buzz has been about Amazon’s potential foray into the telecommunications market.
There’s a report from March that few people paid much attention to, but now the pieces of the puzzle are starting to fall into place. Amazon, according to a Reuters report, announced “plans to launch its first internet satellites to space in the first half of 2024.” The market didn’t seem to care much about this development, but in hindsight, it was probably a signal that Amazon was getting ready to dive headfirst into the telecom space.
Now, the e-commerce giant is threatening to become a telecom giant as well, as Amazon is reportedly in talks with “wireless carriers about offering low-cost or possibly free nationwide mobile phone service to Prime subscribers,” according to Bloomberg.
Granted, Bloomberg cited “people familiar with the situation,” so there’s no way to gauge the reliability of this report. Still, given Amazon’s aforementioned plans to launch internet satellites into space, it shouldn’t be too surprising if Amazon actually seeks to dominate the mobile phone service market.
One beneficiary of this development is Dish Network (NASDAQ:DISH), which might end up facilitating 5G connectivity to enable Amazon’s potentially free or low-cost mobile phone service for Prime subscription members. Even though there’s no established phone connectivity deal with Dish Network now, DISH stock jumped after the release of the aforementioned Bloomberg report.
Amazon stock could get its own boost and hit analysts’ price targets sooner than expected since free or low-cost mobile phone service would undoubtedly prompt some people to sign up for a Prime membership while convincing current subscribers to renew their memberships. With that in mind, let’s see what the analyst community thinks about AMZN stock’s near-term prospects.
What is the Price Target for AMZN Stock?
There’s absolutely no denying that the experts on Wall Street favor Amazon in 2023. AMZN stock comes in as a Strong Buy based on 37 Buys, one Hold rating, and no Sell ratings whatsoever. Furthermore, the average Amazon stock price target is $136.59, implying 12.7% upside potential.
If you’re wondering which analyst you should follow if you want to buy and sell AMZN stock, the most profitable analyst covering the stock (on a one-year timeframe) is Michael Graham of Canaccord Genuity, with an average return of 30.79% per rating and an 82% success rating. Click on the image below to learn more.
Conclusion: Should You Consider Amazon Stock?
I feel that it would be a win-win for Amazon’s Prime members and the company’s shareholders if Amazon offers free or cheap mobile phone service. The only ones who should be worried are rival phone service providers and Amazon stock short sellers.
Ultimately, Amazon can continue to grow despite the company’s perceived overvaluation. So, unless you intend to stand in front of a fast-moving steamroller, it’s likely not a great idea to bet against AMZN stock, and you might want to consider holding a few shares for the long term.
