Amazon Stock Has Upside in a Post-Pandemic World
Amazon (NASDAQ:AMZN) has performed well during the pandemic. So has Amazon stock. It gained nearly 74% in 2020 despite a slew of challenges including the pandemic, a stock market crash, a recession, and a tech stock selloff to end the year. While AMZN is up slightly so far in 2021, the stock essentially plateaued last fall. At this point, Amazon shares still haven’t recovered to their all-time high close of $3,531.45 on Sept. 2.
That gives AMZN nearly 7.5% upside from current levels just to get back on track. Tempting. What makes Amazon stock even more tempting is the analysts who have price targets of $4,000 or more for Amazon shares.
But are these Amazon bulls overlooking risks like a post-pandemic world where people start shopping in stores again, or the risk that the e-commerce giant might be hit by government antitrust investigators?
Amazon Was Built for the Pandemic, But Also to Thrive Afterward
When the pandemic shut down stores and left people scrambling for entertainment in their homes, Amazon was ready. The company’s vast e-commerce infrastructure, including warehouses and rapid shipping capability across the country, made it the go-to choice for consumers.
Everything from food to video games could be delivered to their door. Amazon Prime video was there for streaming entertainment. With remote work, streaming, and online gaming, Amazon was also there with AWS, the world’s biggest cloud computing service.
In a GeekWire interview, New York University marketing professor Scott Galloway summed up Amazon’s position during the pandemic compared to other big tech giants: “If there’s one that was invented for a pandemic, hands down it’s Amazon.”
However, Amazon is also positioned to come out of the pandemic and continue rolling. It becomes business as usual — which was already fantastic — but with the boost of added customers who signed up last year. People are not simply going to stop shopping online.
Healthcare Could Be Its Next Big Growth Catalyst
Professor Galloway thinks that the company is poised for big growth in a new market: healthcare. He predicts it will become the worlds fastest growing healthcare company. We saw that start with Amazon Pharmacy. I wrote about the online prescription service when it launched last November. Galloway has a prediction about Amazon’s strategy:
What does Amazon do? They come into an industry and they raise trust and satisfaction. And if you look at the industry where all roads lead to — high margin, huge industry, lack of consumer satisfaction — all roads lead to the same place. And that’s healthcare. Amazon will probably be the first company that takes health care from being on your heels and defensive, let’s react to your problems, and let’s get on to our toes.
What About the Antitrust Threat?
Amazon has been under scrutiny for years. Most recently, the focus has turned to third party marketplace sellers. Antitrust watchdogs in the EU and the U.S. (including Congress and the Federal Trade Commission) have been investigating claims of anticompetitive behavior by Amazon against sellers on its platform.
Even when governments act, it can take many more years for an outcome to be determined. The result is seldom anything more than a financial penalty. At this point, the worst-case outcome for Amazon seems to be a stiff fine from the EU — something the company could easily shrug off if it were to happen.
Bottom Line on Amazon Stock
You know how I feel about Amazon stock. It’s a solid, low-risk, long-term growth foundation addition to any portfolio. Yes, it’s expensive, but the longer you wait, the more expensive it gets — that’s the magic of growth. The biggest risk to Amazon remains the prospect of government antitrust investigations. That being said, the prospect hasn’t fazed investors.
My take on AMZN is hardly radical. Checking in with the Wall Street Journal, of 50 investment analysts being tracked, two outliers have AMZN rated as a “hold.” 43 have it rated as a “buy” and five feel it is “overweight.” They currently have an average 12-month price target of $4061.19, for 24% upside.
Those numbers are virtually unchanged from three months ago. In other words, the ongoing Covid-19 vaccination program and the prospect of the pandemic’s end is not spooking these investors at all. Neither is the news that Jeff Bezos will be stepping down as CEO .
Amazon is a company that was built for the pandemic and built to continue to thrive in the post-pandemic world. Healthcare could well be its next big growth catalyst. For the foreseeable future, Amazon stock has nowhere to go but up.
On the date of publication, Louis Navellier had a long position in AMZN. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article.
InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
