Amazon Stock Gained 6.7% in June


Jul. 6 2019, Updated 5:13 p.m. ET

Amazon announces air fleet expansion

Amazon (AMZN) stock gained 6.7% last month. While there was no specific news that drove Amazon’s stock price, there were significant developments for the company. FedEx (FDX) stated that it will not renew Amazon’s domestic air delivery contract after the current one expires.

At the Paris Air Show in June, Amazon revealed plans to add 15 cargo jets to its US air delivery network. Amazon has also upgraded its Prime Delivery service, moving toward a one-day standard delivery time from two-day delivery. It also aims to grow its delivery fleet to 70 jets by 2021.

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Robust Prime Day sales expected

Amazon’s flagship sales holiday, Prime Day, is similar to Black Friday sales. Prime Day will now be held for 48 hours, up from its former 36 hours. Amazon has confirmed that Prime Day 2019 will see the biggest Prime Day discounts on Alexa-powered devices so far. These deep discounts could attract Prime members, whose global base now stands at 100 million. Prime members spend more on Amazon’s platform than do regular members.

Amazon valuation

Amazon stock’s forward PE ratio is 49.5x. Considering that the company’s earnings are expected to expand 35.6% this year and 40.10% in 2020, the stock’s PE ratio makes it look overvalued.

However, Amazon has continued to grow robustly. Analysts expect Amazon’s sales to rise 18.2% in 2019 and 17.9% in 2020, and for its earnings to expand by an impressive 94.0% annually in the next five years. We noted in June that Amazon looked like a solid pick, and it has risen significantly since then.

This optimism is implied in analysts’ price targets. The 47 analysts tracking Amazon stock have an average 12-month target price of $2,231.98, which implies a 17.9% upside from its current price. Amazon stock has risen 11.3% in the last year, 157.0% in the last three years, and 471.0% in the last five years.


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