Amazon.com Inc. (NASDAQ: AMZN) has a full plate these days. While the company awaits the departure of founder and CEO Jeff Bezos, it also struggles with the prospect of antitrust action by federal regulators.
Meanwhile, it plans to make some key acquisitions, should the feds not get in the way.
All of this has investors wondering about our Amazon stock forecast for the next few years. Though it’s highly priced after some insane growth over the last 10 years, it still has much further to go.
One analyst gives Amazon stock a price target of $5,500 per share as soon as 2022. But even that is conservative for what lies ahead.
The cloud segment of Amazon reported 28% revenue growth for Q4 2020. It was Amazon’s first $100 billion quarter. And this was no fluke. Some major catalysts for AWS make Amazon stock a winner over the next several years.
But even that is not the biggest driver of our 2022 Amazon stock forecast today.
Amazon Stock Forecast: Amazon Is Still Top Dog
Looking forward, Amazon has high hopes for its cloud computing business and more.
But in the next few years, the company expects the biggest gains to come from its bread and butter.
Amazon started as an e-commerce giant. According to eMarketer, it rakes in over 40% of online sales in the United States per year.
It even increased sales by 32% for 2020, through the pandemic. But it won’t stop there.
E-commerce will continue growing Amazon’s top line in the years to come.
In fact, the company plans to expand its logistics footprint by about 50% over the next two years. That means more warehouses and other operational facilities for Amazon.
Currently, it operates 281 million square feet, and it plans to add 143 million more.
What’s great is that this growth does not come at the expense of other segments. Amazon Web Services will continue to shine and even expand under new leadership.
The company’s new, upcoming CEO, Andy Jassy, was with Amazon in the early days. He was previously the director of Amazon Web Services. He knows its potential, and he knows what it takes to get it there.
Today, 32% of the $41.8 billion cloud market belongs to Amazon, compared to Microsoft Azure’s 19% and Google Cloud’s 7%. Don’t be surprised if that Amazon market share increases in the future.
With all these growth factors, Jeffries analyst Brent Thill gives Amazon a $4,000 price target for Amazon over the next two or three years, a 16% rise.
The pieces are already coming together in front of our eyes. There are even a few developments that could double that price prediction.
The Silver Lining of Losing Jeff Bezos
Jeff Bezos announced he would step down from his position as Amazon CEO this year. Shares dropped 12% in the month that followed the Feb. 2 news.
But despite the immediate reaction, the news wasn’t all bad. That’s why shares have since rebounded.
When Bezos leaves on July 5, he will be replaced by Andy Jassy.
Jassy led Amazon’s cloud computing business, Amazon Web Services, to where it is today. This is important, because Amazon Web Services will become a much bigger portion of the Amazon business in the years to come.
And Jassy is just the person to make that expansion happen.
He has been on the team about as long as Bezos, so he has enough insider experience to keep the company going on its current trajectory while further developing AWS.
Amazon also will not be completely without Bezos, who will take a position as the head of Amazon’s board of directors.
This means Bezos will continue to have some say in the company’s direction but also more time to focus on outside projects such as his Blue Origin spaceship company and charity work.
It’s clear from the stock price recovery that Bezos’ departure did not affect Amazon much beyond the first month after the announcement. The company will be handed off to the best possible candidate.
Now, Amazon is also on its way to a couple of major mergers that could send the stock even higher.
Amazon Is Making All the Right Moves
Amazon and Metro Goldwyn Mayer recently announced a merger agreement where Amazon will buy MGM for $8.45 billion. That’s MGM the film company – the one with the roaring lion at the start of every movie.
If this merger goes through, Amazon gets a huge boost in its original content department. This is much needed to compete with the likes of Apple Inc. (NASDAQ: AAPL), Netflix Inc. (NASDAQ: NFLX), Roku Inc. (NASDAQ: ROKU), and others.
These companies all want to best each other in the art of storytelling. And MGM has more storytelling experience than all of them – nearly half a century.
That makes MGM and Amazon a match made in heaven. One is a legacy filmmaking company, the other is a modern digital media giant promising to keep it alive in exchange for exclusive access to its premium-level content.
MGM is responsible for over 4,000 films including James Bond, Robocop, and Tomb Raider. It also has 17,000 TV shows under its belt including Fargo, Handmaid’s Tale, and Vikings.
Of course, this deal has not been without antitrust scrutiny. The Federal Trade Commission has requested to oversee the deal as part of the ongoing probe against big tech.
If the acquisition pans out, it will be big for Amazon. If not, Amazon may have a more difficult time holding ground in the content streaming market.
But this is not the only major acquisition activity by Amazon of late. It’s also finalizing a deal to acquire Wickr, an encrypted chat app used by government agencies, including the Department of Defense.
This is a great sign for Amazon’s developing relationship with the public sector, as the company has been embroiled in a battle with Microsoft to win a DoD cloud contract since 2019.
If Amazon manages win that contest on top of everything else, the stock could soar even higher.
Susquehanna Financial Group says Amazon stock could hit $5,500 by April 2022, a 46% gain from today’s price.
Long-term, however, Amazon will keep innovating and expanding its key segments, which may quickly double those gains between now and 2030.
— Mike Stenger20 Stocks That Benefit from 5G Technology and Could Soar in 2021 [sponsor]
Forget AT&T, T-Mobile, or Verizon – the truth is, you’re too late to profit by investing in 5G directly. A better route is to focus on the $1.4 trillion aftershock market that 5G will create – and the 20 companies Michael Robinson has identified. Each is projected to return 10X by the end of the year and could dwarf the 5G gains we’ve seen already. Get the details here.
Source: Money Morning