Amazon (AMZN) stock rose 4.7 percent on July 6 and hit a new 52-week high. It was the first trading day for the company after founder Jeff Bezos quit as the CEO and Andy Jassy took over the position. AMZN stock has also become popular on Reddit group WallStreetBets, which has built its reputation by triggering a short squeeze in many stocks. How high will Amazon stock go and can Reddit traders make it a $2 trillion company?
Currently, Apple and Microsoft are two companies with a market capitalization above $2 trillion. Along with Amazon, Alphabet (GOOG) is another strong contender for the prized milestone. Bulls like Cathie Wood and Gene Munster also see Tesla as the next $2 trillion company.
Amazon stock on Reddit group WallStreetBets
ContextLogic (WISH) stock is among the most popular names on WallStreetBets. Several members talked about taking it to the moon and highlighted its tepid valuations compared to Amazon. Now, WallStreetBets members also seem interested in AMZN stock.
A user by the name bigma2010 with over 1,200 comment karmas attributed the rise in AMZN stock to Bezos stepping down. Amazon’s founder isn't very popular on social media groups. Thousands of people signed a petition to stop Bezos from coming back from his space travel.
A user by the name LowNotesB with over 15,300 comment karmas attributed the rise in Amazon stock to the cancelation of the JEDI contract. Amazon lost out on the lucrative and prestigious JEDI contract to Microsoft.
How high will Amazon stock go?
Amazon’s median target price of $4,225 implies an upside of almost 15 percent over the current prices. If the stock hit the highest target price of $5,500 assigned by Susquehanna analyst Shyam Patil, it would mean an upside of almost 50 percent.
Will AMZN stock reach $2 trillion market capitalization?
Even if AMZN hits its median target price, its market capitalization will swell above $2 trillion. In the best case, if Patil’s predictions come true, the stock’s market cap will approach $3 trillion. Munster has predicted that Apple’s market cap will hit $3 trillion.
Munster correctly predicted the iPhone maker’s market cap hitting $2 trillion and forecast that Apple will be the best performing FAANG stock in 2021. However, AAPL is the second-worst performing FAANG in 2021 based on its YTD price movement.
Why Amazon stock should rise more
Amazon stock has positive long-term fundamentals. The company is expected to grow the top line by double digits in the near future. Apart from the continuing growth in the North American e-commerce market, Amazon would also reap the benefit of growing sales in international markets.
Munster expects between 15 percent and 20 percent of Amazon’s growth over the next five years to come from India where the company has invested heavily. The company’s international operations turned profitable in the first quarter of 2021, which is a positive sign.
Overall, Amazon is one stock where we see secular long-term growth. Both cloud and e-commerce look among the most promising investing theme for the next decade. Amazon has an enviable market-leading position in both industries. The stock’s valuation multiples look reasonable with an NTM PE ratio of around 64x.
How risky is it to invest in AMZN stock?
There are several risks if you invest in AMZN stock. First, there's growing regulatory scrutiny of U.S. tech giants globally, which could dampen the sentiments. Also, the company faces hurdles in India due to e-commerce law revisions.
Finally, it will be interesting to see how Amazon progresses under Jassy’s leadership. Bezos’s leadership has been among the key factors behind Amazon’s success. The risk-reward looks skewed towards the upside and AMZN stock could continue to go up in the medium to long term.