Amazon had poor Q3 2021 financials, causing its stock price to drop to $3,300/share in early November. However, market experts still see high growth potential in AMZN for a few reasons.
Amazon still boasts strong fundamentals*, despite disappointing Q3 2021 results.
For those of you wondering how Amazon performed in Q3 2021 and what are the expectations for Q4, here are some stats to check out:
- Revenue rose 15%, down from 37% growth in the same period a year ago.
- Amazon's online store sales climbed 12% – compared to approximately 40% last year.
- For the last quarter of the year, Amazon forecast sales between $130 billion and $140 billion, representing growth between 4% and 12%.
But these numbers do not reveal the whole picture. Not many people can say that it's not rocking the e-commerce space, just like in the golden days when it comes to Amazon.
Starting with demand - Amazon has been creating plenty of hype for its products and services while keeping its customers loyal for many years now. By 2025, nearly 7 out of 10 American households will have a Prime membership, meaning the Seattle-based corporation is a strong candidate to seize the growth opportunities deriving from this.
On the cloud segment, both the present and the future sound promising. Amazon Web Services (AWS) became crucial in keeping total profits afloat in the third quarter of 2021. Now, Amazon estimates the cloud will post an annual growth rate of approximately 20% through 2028 at least, from which its stock can benefit.
*According to investopedia.com, a company with little debt and sufficient cash has strong fundamentals.
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The buy & hold strategy has historically worked well for Amazon.
While it may be hard to predict short-term stock price movements, the recent fall in Amazon share price can be something to look into for long-term traders and investors.
According to thestreet.com, buying AMZN and holding it for a year has produced an average of 33% gains since 2001. Doing so after a stock correction has led to even better returns of 42%. Therefore, with the stock experiencing a slowdown in its growth at the end of October, this could be THE MOMENT to make your move on Amazon stock – if you're thinking on the longer term.
Wall Street vouches for Amazon.
The pandemic made analysts rethink the shopping habits of online consumers. However, Amazon's two most recent earnings reports have proven that e-commerce took advantage of a temporary spike in buy-from-home activity throughout 2020. That trend has reverted to the traditional in-store sales throughout 2021.
Even if expectations have changed, the Wall Street consensus remains bullish. TipRanks analysts give Amazon stock a 'Strong Buy' rating, noting that it should value over $4,000 in the upcoming 12-month window. The average price target is $4,075.34, with a high forecast of $4,500.00 – an up to 28.5% increase from the stock price of November 5 - $3,519/share.
What analysts say of Amazon stock:
JPMorgan recently raised their price target to $4350 from $4100, stating that Amazon's inventory days are at their highest for the holidays, suggesting the company should do better than competitors in the near term.
Stifel expects Amazon stock to be "a big outperformer in 2022", maintaining its target at $4,400 for the e-commerce stock.
Despite lowering its price target from $4250 to $4100, Goldman Sachs believes that Amazon's Q4 guide was "much better than feared", stating that the company is well-positioned to meet consumer demand, despite supply chain problems.
Sources: thestreet.com, finance.yahoo.com, cnbc.com, investopedia.com.
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