Amazon.com (NASDAQ: AMZN) is currently priced at $995.95, recently making headlines after breaking the $1,000 benchmark. The Seattle-based e-tailer is finally in the black after spending years in the red. The question is whether Amazon is worth your hard-earned money.
Let’s take a look at the company’s services along with a quantitative analysis of the stock to help you determine whether to buy or sell.
An Overview of Amazon.com
Amazon employs 341,400 people across the globe. The company is the largest and most successful e-tailer on the web. Aside from selling and delivering countless items to people cross the world, Amazon also generates revenue through its Amazon Prime streaming video service.
The company’s personalized digital assistant, Alexa, has also proven quite popular. Alexa even integrates with ADT home security systems, Ford vehicles and LG speakers. It is likely that Alexa’s role will grow even larger as the “Internet of Things” (IoT) becomes even more ubiquitous.
Some analysts expect the digital companion sector to become a $10 billion industry within a couple years. Yet the brunt of Amazon’s business comes from selling consumer products. The company sells everything from sneakers to video games, nose hair trimmers, books, clothing, sporting goods and beyond.
Amazon is working on implementing drone package drop-offs to hasten product deliveries. The company already provides one-hour delivery in Milwaukee. There are plans for bricks-and-mortar Amazon outlets that are completely cash-free. It is certainly possible that Amazon will soon put numerous grocery stores out of business in addition to the bricks-and-mortar retailers the company has upended across the past decade.
It is clear that Amazon is a work in progress that continues to evolve in new and exciting ways.
Amazon by the Numbers
Amazon’s stock debuted at a mere $1.50 back in May of 1997. The stock is currently priced around $995 as of June 2017. Amazon’s 52-week low is $682, and the yearly high is just above $1,000. The stock is priced above its 50-day moving average of 941.53 as well as its 200-day moving average of 846.76. Slightly less than 18 percent of the company’s shares are held by insiders. About 67 percent of the shares are held by institutions.
Amazon has a market cap of 475.911 billion. Average daily trading volume is 3,288,299. The company has the same amount of cash as debt: $21 billion. Amazon’s beta is 1.39. This means the stock is fairly volatile compared to the rest of the market. Buyers should anticipate considerable price swings. So don’t rush to close out your Amazon position in the event of a dip.
Amazon’s P/E ratio is a whopping 187.51. This would be cause for concern if Amazon wasn’t the stereotypical high-flying tech stock. Don’t let the P/E ratio scare you away. Think of it as part of the territory; a necessary evil of sorts. However, the company’s PEG ratio is egregiously high at 4.55. Add in the fact that the 5-year expectation for Amazon’s PEG ratio is between five and six and the argument can be made that the stock might be overvalued.
A Wall Street Darling
Amazon has beat the street’s earnings projections in the first quarter of 2017 and the fourth quarter of 2016. The company missed expectations in the third quarter of ’16. Take a look at Amazon’s revenue figures for the past three years and you will spot quite the positive trend. Revenue was just under $89 billion in 2014. The figure spiked to $107 billion in 2015.
This past year was Amazon’s best ever with $135.99 billion in revenue. In terms of earnings, Amazon earned $596 million in ’15 and an incredible $2.37 billion in 2016. Quarterly revenue growth is an astonishing 33.60 percent. Quarterly earnings growth is an even more impressive 41.10 percent. To say business is booming for this tech superstar would be an understatement.
The Analysts’ Take on Amazon
Ask the experts about Amazon, and you will get a bullish response. Analysts have settled on a one-year price target of $1,095. This is a fairly conservative estimate that Amazon could easily surpass. The lowest analyst price target is $937, and the highest target is $1,250.
Most analysts have rated Amazon as either a “strong buy” or “buy” across the past three months. The average analyst recommendation is a 1.9, with a 1.0 equaling a “strong buy” and a 2.0 equaling a “buy”.
If you own Amazon, you have likely made a tidy profit across the recent months and years, meaning this is not the time to sell. Yet it might not be the best time to load up on Amazon shares.
The stock will likely continue to increase in value as long as the government does not interfere by claiming the company’s market share has grown too large. After all, many blame Amazon for the closure of malls across America and beyond. If the beltway power brokers begin discussing regulations or efforts to slow Amazon’s growth and subsequently limit the company’s market share, it will be time to consider selling. Yet there is no guarantee that such a development will occur.
Your best bet is to buy and hold Amazon for the long haul.
Regards,
Ethan Warrick
Editor
Wealth Authority
