Technology

Why Amazon Analyst Expectations Keep Surging Ever Higher

Jon C. Ogg

Published: January 16, 2018 10:11 am

Last Updated: January 12, 2020 4:27 am

Amazon.com Inc. (NASDAQ: AMZN) is one of the greatest growth stories of a generation, and one of the greatest of all time. The company now finds itself in a precarious situation on the heels of its Whole Foods acquisition and the rapid rise of its Amazon Web Services. Analysts just keep raising their price targets higher and higher in 2018.

The online seller of everything saw its shares reiterated with an Outperform rating at Oppenheimer, along with the target price raised to $1,450 from $1,330. Oppenheimer’s Jason Helfstein called it the top 2018 large-cap pick. His view is that Amazon is best positioned to benefit from secular trends. The company’s move further into e-commerce, the public cloud, automation and digital advertising, as well as an improving global macroeconomic backdrop and domestic tax reform, should all propel shares higher.

In an even larger call, BMO Capital Markets raised its target on Amazon to $1,600, for the highest official street-high analyst target tracked by Thomson Reuters. The prior high target was $1,525.

BMO’s Daniel Salmon talked up Amazon’s advertising opportunity as an $18 billion total addressable market in the midterm horizon. He even thinks that Amazon can generate 22% of its total gross merchandise value from direct response ads.

While these two calls from Tuesday were large and impressive, other analysts have chimed in with higher price targets. The calls we have tracked, and this is likely not the full list, since the end of 2017 were seen as follows:

• SunTrust Robinson Humphrey raised its price target to $1,400 from $1,270.
• Stifel raised its price target from $1,313 to $1,425.
• UBS raised its target price to $1,440 from $1,250.
• Citigroup raised its target price from $1,250 to $1,400.

It just seems that Amazon can do no wrong in the eyes of the investing community, despite many faults and limitations that have been pointed out about the company over the years. Amazon also seems to be considered a strong competitor in almost every field it enters, even if it has no experience compared with competitors that have been around for decades. The company also seems to never really get punished for operating with such low margins and having such high valuation multiples. The addition of two more analyst target hikes makes at least six of them in just 10 trading days.

Amazon shares were already up over 11% in just the first two weeks of 2018, and its stock was last seen trading up another 2.4% at $1,336.50 on Tuesday morning. Its prior consensus target price was $1,310.47, and Amazon just keeps hitting all-time highs.