Amazon (AMZN) stock has recovered from its 2021 lows and is up almost 9 percent YTD. However, it's underperforming the markets by a wide margin and it's the worst-performing FAANG stock in 2021. Is Amazon stock a good buy now and how high can it go?
There has been a lot of churn in FAANG stocks in 2021 and the best-performers of 2020 are underperformers in 2021. Apple, which was the best performing FAANG stock in 2019 and 2020 is underperforming the markets in 2021. Apple's YTD returns are way below Alphabet and Facebook.
Amazon's stock forecast
While Amazon stock has been underperforming, analysts have a bullish forecast. Its average target price of $4,200.80 is a premium of 21 percent. All of the 31 analysts polled by TipRanks rate AMZN stock as a buy. The stock has looked weak amid the general sell-off in e-commerce names amid the reopening.
The company’s second-quarter results didn't allay slowdown fears and its revenue growth fell short of the estimates. It was the first time in three years that the e-commerce giant’s sales growth was lower than consensus estimates. To make things worse, its third-quarter guidance was also below the estimates.
How high can Amazon stock go?
Amazon stock has a street-high target price of $5,000, which would mean an upside of 44.1 percent over the next 12 months. Susquehanna Bancshares, which is the most bullish brokerage on AMZN, lowered its target price from $5,500 to $5,000 after the second-quarter earnings release. Several other brokerages lowered the stock’s target price after its second-quarter earnings release.
Susquehanna analyst Shyam Patil increased Amazon’s target price to a street high of $5,500 after the company’s first-quarter performance. Patil expected that the strong business environment would continue in 2021.
However, AMZN’s second-quarter earnings release left some of the bulls disappointed. While some of the brokerages lowered the target price on Amazon stock, they maintained their bullish bets.
AMZN and AFRM partnership
Amazon and BNPL (buy-now-pay-later) company Affirm announced a partnership in August to bring BNPL solutions to select buyers on the Amazon platform. The deal is expected to expand to more customers in the future. The deal could be a key driver to spur AMZN’s sales in the U.S., which is its largest market by geography. Credit Suisse issued a bullish note on Amazon stock after the Affirm deal was announced.
Is Amazon stock a good buy now?
Amazon stock has been under pressure amid short-term headwinds. The growth slowdown wasn’t unexpected since the economies have reopened. However, there are strong secular growth trends for AMZN stock. It has an enviable market-leading position in both cloud and e-commerce operations, which are two of the fastest-growing industries.
Retail is gradually moving online, both in the U.S. as well as internationally. The percentage of online sales in total retail sales is expected to go up sharply over the next few decades. While brick-and-mortar retail companies would also get a share of the pie, with its network effect, Amazon would be among the major beneficiaries of rising e-commerce sales.
Overall, Amazon stock looks like a good buy now after the recent underperformance. The company continues to grow its business, both organically and inorganically. Amazon stock appears to be among the best stocks to own for the long term.