Will Amazon Stock Reach $1000?

Will Amazon Stock Reach $1000? Bull Case Scenario

Amazon has come a long way from an online book retailer in 1994 and is now a leader in Amazon Web Services and the advertising industry. The company has become an e-commerce titan and also has a dominant market share in cloud computing with Amazon Web Services. It is also the third-largest ad platform, only behind Google and Facebook. The cloud computing market is expected to grow at a CAGR of 14.1% through 2030. AWS has a 33% market share in cloud computing, which is a major reason to invest in Amazon stock.

Despite declines in the e-commerce business in 2022, AWS was responsible for 100% of Amazon’s operating income’s growth, reaching $7.7 billion in the second quarter of 2023, a substantial increase from the $3.3 billion reported in the same quarter of 2022.

In the second quarter of 2023, AWS segment operating income was $5.4 billion, slightly down from the $5.7 billion operating income reported in the same quarter of 2022.

Will Amazon Stock Reach $1000? Bear Case Scenario

Despite Amazon’s shares falling by 49% in 2022, the stock has surged by 60% in 2023, making it appear expensive when compared to its rivals. The drop in the past year significantly affected its free cash flows, as illustrated in the chart below:

*Source: YCharts

The above figure suggests that Amazon’s peers Apple, Alphabet, and Microsoft’s free cash flow positions are much better than Amazon’s. The company’s free cash flow has turned negative, and its price-to-free cash flow ratio is 239.67. Amazon’s performance in the downturn phase of the economy has made it a less reliable option.

*Source: YCharts

Amazon’s P/E is the only one to rise last year, while other companies’ P/E have remained constant as stocks have increased in value. The combination of poor financial performance has led to Amazon’s P/E touching 103.7, which is much higher than its peers. For example, Apple has 32.6, and Microsoft has around 35. So, Amazon is far more expensive than its peers, even after declining 50% last year.

Can Amazon Stock Touch $1000?

So, we get back to the basic question: can Amazon’s share price touch $1000? While it was already around $3000 last year pre-split, a 20:1 forward stock split has bought the share price around $150, and then there is some decline in the share price.

The share price of around $3000 was a culmination of constant growth since 1999 when the stock split happened before 2022. Now, it will take another such leap in revenue and profit growth for the company to achieve the $1000 mark.

The earnings are expected to reach $5.11 by 2026. Assuming the far-end P/E ratio of 100, the share price will reach $511 by 2026. Hence, it will take at least a decade from today for the Amazon share price to reach $1000 if the company does not decide to split the shares in between.

Will Amazon Stock Reach $1000? Conclusion

Amazon indeed has great long-term opportunities in form of AWS and the advertising industry, while e-commerce business can be sloppy going forward. But in the current scenario, other tech options are available at better pricing than Amazon Inc.

Note: Crowdwisdom360 collates Predictions and data from all over the net and has no in-house view on the likely trends in the Stocks or Crypto Coins. Please consult a registered investment advisor to guide you on your financial decisions.