Amazon will hit $199 / $223 says Analyst. So, Buy now?
$Amazon.com(AMZN)$ is an e-commerce colossus serving hundreds of millions of customers with rock-bottom prices and fast delivery.
Its status as online retail’s most successful company is not what is behind its rocketing stock price.
Investors have piled into Amazon stock on optimism that it will benefit from a surge in spending on artificial intelligence (AI).
Amazon Web Services (AWS) is the market-share leader in cloud data solutions, making it ground zero for AI research & development. (see above)
Potential to profit from demand associated with training and operating AI apps has helped Amazon’s share price swell +85% in the past year alone and +14% YTD.
The rapid runup is good news for investors, but it does raise the question: What happens now?
In November 2023, financial newsletter - “Real Money Pro” Bruce Kimich calculated a $200 price target for Amazon shares.
As of 27 Feb 2024, Amazon’s stock price has not reached Kamich’s target.
However, gains have been significant enough to prompt Kamich to update his analysis, including a revamped price outlook.
Below are some of the reasons / justifications.
(1) Amazon benefits from soaring interest in AI
In 1994, Jeff Bezos founded Amazon as an online bookseller in his garage.
30 years on, today the company sells almost everything everywhere, competing fiercely for market share against major retailers including Walmart, Target and Costco.
E-commerce accounts for the bulk of Amazon’s quarterly sales, but AWS cloud solutions is the most profitable.
15 years ago, AWS was only a budding business.
Today, it generates nearly $100 Billion in annualized revenue, helping companies and governments store, protect, analyze and access data in the cloud.
The need for workers to access data remotely during covid lockdowns accelerated opportunities for AWS to embed itself more deeply with its customers.
Those relationships are paying off this year (2024) as users investigate how to make the most of AI.
For example,
Finance companies are using AI to hedge risks.
Health-care companies are evaluating AI’s ability to improve drug development.
Retailers are seeking to use it to prevent theft etc…
Seemingly, everyone is exploring how AI (including large-language models like OpenAI’s ChatGPT) may help them.
That’s a boon to Amazon because much of the training and use of AI apps is happening on its servers:
In Q3 2023, revenue increased +12% YoY to $23.1 Billion.
In Q4 2023, AWS revenue grew +13% YoY to $24.2 Billion.
In a 2023 interview, Amazon CEO Andy Jassy thinks:
AWS has a long AI runway.
There’s a lot of growth in front of AWS and I’m very optimistic, he said.
Customers are looking to bringing the AI-models to their data, not the other way around. And much of that data resides in AWS."
2024 Top 3 Cloud service provider: (see above)
AWS market share in cloud solutions is 32%. Undisputed leader.
Microsoft Azure market share is 23%.
Google’s Cloud market share is 10%.
(2) Amazon’s Dow 30 promotion.
$DJIA(.DJI)$ is composed of America's largest and most influential companies.
The holdings in the Dow’s list of 30 companies do not change frequently.
The last time it was revised was back in 2020 when Amgen, Honeywell and Salesforce were included.
On Mon, 26 Feb 2024, Amazon’s promotion into the Dow was capturing attention of its own.
Amazon is a natural fit for inclusion because it already boasts a $1.80 Trillion market cap, and its reach includes retail and technology.
Following its addition, Amazon accounts for about 3% of the Dow Jones Industrial Average.
(3) Amazon's technical analysis (TA) reveal.
Bruce Kamich is a technical analyst who has professionally analyzed price and volume charts and indicators for more than 50 years.
His experience using technical analysis enabled him to correctly:
Be bullish about Amazon shares last summer.
Turn bearish on Amazon in September 2023.
Calculate a price target of more than $200 in November 2023, when the shares were trading below $150.
With Amazon shares are near $175 per share, Kamich recently updated his analysis, resulting in a new target price.
In his latest analysis, he noted:
Amazon shares have advanced since early 2023.
However, trading volume has been decreasing for more than a year.
Old-time chart readers like himself, would rather see trading volume increase in the direction of the trend.
The on-balance volume, (a measure of up minus down day volume) while “positive” is only back to the levels seen in 2021 and early 2022.
The moving average convergence divergence oscillator, a momentum indicator, has “started to narrow”, possibly suggesting that Amazon’s rally may be running out of steam.
The point-and-figure chart price calculations offer a “good” news. Using (a) a daily and (b) weekly P&F chart, Kamich calculated Amazon price targets of $199 and $223, respectively.
*Note: Investors should remember that P&F charts do not predict time frames, and there is no guarantee that price targets will be met.
Kamich also says that if Amazon trades below $166, the daily price target may weaken, so investors will want to keep tabs on Amazon, to see how it will behave in the coming weeks.
My viewpoints: (mine & mine only)
I believe Amazon will remain the global leader as Cloud service provider as it continues to invest on its cloud infrastructure. (see above)
At the same time, Amazon has provided new chips for customers to build and run artificial intelligence applications on AWS.
Amazon is investing up to $4 Billion in the high-profile startup Anthropic, in its effort to compete with growing cloud rivals on artificial intelligence.
Amazon is forging ahead in the Land of Artificial Intelligence like its counterparties as Cloud Services competition heat up.
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