- Amazon is among JPMorgan’s best investment ideas for 2019, mostly due to its diversified revenue and profit sources.
- The firm explained its bull case in a detailed report distributed Wednesday.
- The stock rose 28% in 2018, handily outperforming the broader market during what turned out to be a brutal year for most assets. Still, it has fallen 19% from its all-time high of $2,050.50 in October.
- Watch Amazon trade live.
Amazon is among JPMorgan’s best investment ideas for the coming year, and the bank’s analysts detailed their bull case in new report distributed Wednesday.
“AMZN is well positioned with the most diversified revenue & profit streams among large-cap Internets,” a team of analysts led by Doug Anmuth told clients. “We believe this is a critical differentiator as sector growth moderates due to bigger bases & higher penetration levels.”
The analysts broke their bull case down into several parts. Anmuth said the company’s fastest-growing revenue streams are its most profitable, referring specifically to Amazon Web Services and advertising. Both represent around 17% of Amazon’s total sales, by JPMorgan’s estimates, and more than 85% of its operating profit this year.
Their rosy view of Amazon’s advertising segment is in line with some other analysts. Brian Wieser, a research analyst at Pivotal Research Group, told clients this week that Amazon is particularly well-positioned in its advertising business.
“At around 10% of the global total in 2023, Amazon will easily be the ‘third force’ in digital advertising after Google and Facebook, although it will still be substantially smaller than the $215bn in annual revenue we expect Google to generate or the $59bn we expect to see from Facebook,” Wieser said.
JPMorgan also pointed to growth opportunities in areas like grocery (with its Whole Foods acquisition), healthcare and pharmaceuticals (with its Pillpack acquisition), and smart-speaker technology.
The firm’s $2,100 year-end price target implies a rally of nearly 27% from the stock’s current levels. Even with that bullish of an outlook, it pales in comparison to Wall Street’s most optimistic target — and most are optimistic.
Of analysts surveyed by Bloomberg, D.A. Davidson analyst Tom Forte is the most bullish, with a $2,450 price target. A full 94% of analysts call the stock a “buy,” two have “hold” ratings and one says, “sell.”
Amazon shares soared 28% in 2018, outperforming the broader market during what turned out to be a brutal year for most assets. Still, the stock has now fallen about 19% from its all-time high of $2,050.50 in October.
The stock was little changed Wednesday after Amazon’s CEO, Jeff Bezos, said in a statement released on Twitter that he and his wife, MacKenzie, were divorcing. It is uncertain what will happen to Jeff Bezos’ 16.12% stake in the company.