Amazon has a number of growth drivers justifying its upside
Amazon (AMZN) stock has been one of the best performers in 2018. The stock has already given returns of 38% this year despite the volatility in broader markets. CNBC recently came out with a report citing Cowen that Amazon could be the best investment for 2019. It has a target price of $2,250 in the next 12 months, a further upside of 37% from current levels. The report said that the cloud and advertising business could be key growth drivers going forward.
Amazon’s e-commerce business is growing at a robust pace. Amazon will likely beat its own revenue growth guidance of 10% to 20% in the current quarter, which is the holiday quarter. We discussed this likelihood in Amazon’s Record Cyber Monday Sales.
Amazon continues to dominate the cloud infrastructure market with a share of 33%. It has managed to maintain its share in a market that grew at around 50% in Q2 2018 on a year-over-year basis. Microsoft (MSFT) is Amazon’s only major competitor in this market, but it is way behind Amazon with a market share of 12%.
Amazon is also growing its advertising business at a rapid rate. According to eMarketer, Amazon is now the third-ranked player in the US digital ad market, and its market share could grow from 4.1% in 2018 to 7.0% in 2020. However, it will still be difficult for Amazon to break the Google (GOOG) and Facebook (FB) duopoly, which accounts for more than half of the market.