Amazon is without any doubt the e-commerce leader by many metrics. In fact, the competition isn’t even close.
Amazon generated $347 billion worth of GMV (gross merchandise volume) in 2020 and this accounted for more than 40 per cent of all US e-commerce sales. By comparison, Walmart holds the second-place ranking with just $54 billion in GMV in 2020 while in third place eBay is even further behind at just $38 billion.
Even if Amazon’s competitors manage to improve their market share, as is widely expected to be the case as Walmart is investing heavily in its online business, Amazon likely has already secured its dominance for decades to come.
But does this in itself bode well for a bullish Amazon stock price forecast in 2021 and beyond?
Amazon's three business units
All the impressive metrics that signal Amazon’s dominance in e-commerce don’t tell the whole story. In fact, this is just one part of the Amazon (AMZN) stock analysis as the company's business units are much larger compared to most people’s perceptions.
Amazon’s business is broken up into three segments: North America, International, and AWS.
North America refers to the retail business in North America and, as expected, the International division refers to the retail business outside of North America. The third, AWS, refers to the company’s fast-growing Amazon Web Service cloud unit.
For all of 2020, the North America segment recorded sales of $236.282 billion and this generated an operating income of $8.651 billion. Sounds impressive, right? Well, maybe not so much when compared to AWS that generated much smaller revenue at $45.37 billion in sales yet recorded a large operating income at $13.531 billion.
As such, one of the key theses towards evaluating an Amazon share price prediction must focus on AWS and other fast-growing businesses.
Amazon stock forecast: all about the cloud
Amazon’s cloud business isn’t the only debate required to answer will Amazon stock go up but it is perhaps the more important one. The company showed impressive growth in sales in its AWS unit from $35.026 billion in 2019 to $45.37 billion in 2020. Operating income accounted for 26.2 per cent of revenue at $9.201 billion in 2019 and improved to 30 per cent of revenue at $13.531 billion.
So as the world continues to re-open, albeit at different paces in different regions, one has to wonder what the AWS business will look like in 2021. Fortunately, the facts we know today certainly bode well for bullish Amazon stock predictions.
Amazon’s AWS business ended 2020 with around $50 billion in backlog deals, up 68 per cent from the prior year. This refers to deals on the table that have yet to be filled.
The company explained during its fourth quarter conference call that AWS added more revenue quarter-over-quarter and year-over-year than any other quarter in history. The business is on track to become a $51 billion annualised run rate business.
Expanding into physical retail
The strength and momentum of the AWS business are part of the bullish Amazon share price forecast. Amazon is in no way sitting back and letting the competition take an ounce of market share as it is always investing and reinvesting in its business.
Flying a bit under the radar, Amazon opened in March its 11th grocery store, Amazon Fresh. The company reportedly has plans to open at least 28 more, of which just five have been officially confirmed.
Amazon’s branded grocery store is meant to stand out compared to its Whole Foods brand. These stores are meant to be less upscale and will likely be built in areas with a high concentration of existing Amazon customers.
Amazon boasts among some of the most loyal and dedicated customer bases with perhaps the exception of Apple. As the old saying states: “if you build it they will come”.
The future of Amazon under a new CEO
Amazon Founder Jeff Bezos announced in early 2021 his intention to step down as CEO but he will keep a watchful eye on his company as executive chairman. He will be replaced with Andy Jassy, CEO of the AWS business.
This is certainly a great development for Amazon’s outlook although it certainly stirred up a major Amazon shares buy or sell debate among investors. Amazon’s stock is down more than 2.6 per cent over a one month-period and barely positive over the past six months.
According to at least one notable analyst, the CEO change unofficially tells investors it is transitioning to a “services company” rather than a retail company that also offers services. D.A. Davidson analyst Tom Forte said on CNBC Jassy will look to transfer the retail business to a “retail as a service” entity that empowers third-party sellers to sell products on Amazon and in return, it will ship products on their behalf.
The timing of the transition may have come sooner than many expected, yet perhaps there were many signs along the way that such a decision was imminent.
“I think it’s a declaration that long-term Amazon is a services company,” the analyst said.
Conclusion: Amazon $4,000 per share in 2021? It’s possible
Amazon’s stock gained more than 60 per cent over the past year and this makes it hard for many investors to model further upside. But some on Wall Street expect the gains to continue throughout 2021 and likely beyond.
Colin Sebastian, an analyst with Baird, is modelling an upside case to $4,000 per share. The bullish outlook is based mostly on the reality that Amazon continues to do what it does best: retain customers through compelling services while adding new ones to generate incremental revenue streams.
Aside from retail, the AWS business offers a similar profile in terms of recurring revenue. According to CNBC, Sebastian said: “Specifically, the company’s market leadership in infrastructure-as-a-service tends to generate significant repeat usage, while the increasing portfolio of software services (e.g., Aurora) adds incremental quasi-subscription revenue streams”.
Speculating on how high Amazon stock could go, we can note that 46 analysts, surveyed by CNN Money, agree with the median price target for Amazon stock at $4,000 within the next 12 months, which represents a 28.57 per cent increase from its previous closing price of $3,111.
The highest analysts’ target for the Amazon stock forecast is $5,200 and the lowest one is $3,420. Polled analysts sharing their consensus rating for the Amazon stock in 2021 agree that it is a “Buy”.
The future of Amazon looks bright, suggesting that the AMZN stock could be a worthy investment in 2021. However, if it has become too expensive for you to buy, you should consider trading it with contracts for difference. CFDs enable you to speculate on any stock’s price movement and open a trade of any size. Check our detailed guide on how to trade Amazon stock with CFDs and find the best levels to open profitable trades on AMZN.
Amazon stock forecast for tomorrow, and next weeks
|Date||Price||Min Price||Max Price|
|2021-09-27||$ 3404,071||$ 3323,019||$ 3489,597|
|2021-09-28||$ 3437,060||$ 3354,393||$ 3524,592|
|2021-09-29||$ 3424,924||$ 3341,575||$ 3508,163|
|2021-09-30||$ 3438,434||$ 3352,166||$ 3526,418|
|2021-10-01||$ 3439,447||$ 3359,619||$ 3520,510|
|2021-10-04||$ 3411,243||$ 3325,477||$ 3495,505|
|2021-10-05||$ 3444,232||$ 3356,259||$ 3528,724|
|2021-10-06||$ 3432,095||$ 3348,666||$ 3521,693|
|2021-10-07||$ 3445,596||$ 3357,352||$ 3530,269|