Amazon is a US technology giant that’s established itself as a leading name in e-commerce, cloud computing and digital streaming.
The company began by selling books before expanding into everything from electronics and video games to clothing, furniture and jewellery.
It also provides downloadable and streaming content through Amazon Prime Video and Amazon Music, as well as being involved in publishing, film production and cloud computing.
Amazon’s success in so many different areas has made it the fifth largest company in the world, with a $1.7tn market capitalisation, according to CompaniesMarketCap, as of 29 November 2021.
The AMZN stock price has risen sharply over the last decade. The company continues to invest in a bid to improve its long-term prospects.
But what does the future hold? Here we take a look at the recent stock performance, assess its latest results and ask analysts for their predictions.
Amazon stock analysis: How has it performed?
The company’s stock price has enjoyed phenomenal growth of 1,791%, rising from $185.27 to $3,504.56 over the ten years to 26 November 2021.
Over the past five years, the stock has risen 373%. Over the past year, the stock has seen a 10% increase from $3,195.34 in late November 2020.
Year-to-date, the stock has gone up 10% from $3,186.63 back in January, even though it dipped slightly in October when third quarter results came in lower than had been expected.
The company has never declared nor paid cash dividends on its common stock.
AMZN stock analysis: The company’s third quarter results
Amazon achieved net sales of $110.8bn in the three months to the end of September 2021 – 15% up on the $96.1bn recorded in the corresponding period last year.
Net sales in North America hit $65.5bn – 10.4% up on the $59.37bn in the third quarter last year, while international sales rose 16% year-on-year to $29.14bn.
However, the company’s statement also revealed that overall operating income decreased to $4.9bn in the third quarter this year, compared with $6.2bn in the third quarter of 2020.
The net income figure, meanwhile, shrunk to $3.15bn during the period, representing a 50% drop on the $6.3bn made in the three months to the end of September 2020.
This substantial decline was down to a combination of factors, including increased expenses and investments made in the business.
Amazon outlook and projections: Growing pains of the business
Having delivered strong revenue growth throughout the pandemic, the last 18 months finally caught up with it, according to Nicholas Hyett, equity analyst at Hargreaves Lansdown.
Andy Jassy, who took over as Amazon’s chief executive in July 2021, pointed out that investments had been made to satisfy customer needs, including almost doubling the size of its fulfilment network since the pandemic began.
“We’ve always said that when confronted with the choice between optimizing for short-term profits versus what’s best for customers over the long term, we will choose the latter — and you can see that during every phase of this pandemic,” he said in the third-quarter results statement.
Jassy also warned this trend was likely to continue and pointed out that while “it’ll be expensive for us in the short term”, it was the right decision for customers and partners.
Amazon stock 5-year forecast: Where could the stock go?
So, what is Amazon’s long-term stock forecast? AMZN stock is rated as ‘buy’ by all 38 analysts highlighted by MarketBeat. This list includes Barclays, BMO Capital Markets, JP Morgan, Citigroup and the Royal Bank of Canada.
Their consensus 12-month price target for the share price is $4,179.47, which would represent a 19.2% upside over the current $3,504.56 level, as of 29 November 2021.
The highest forecast was $5,000, which would be 42% higher than today, while the lowest was an 8% rise to $3,800 by next November.
However, according to the algorithmic forecasting of Wallet Investor (as of 29 November), Amazon could actually increase 25% over the coming year to $4,370.34.
The site, which classes AMZN stock as a “good long-term (one year) investment”, predicts it could reach $5,086.23 by November 2023 and hit $5,788.61 a year later.
Although the algorithm-based forecasting service does not provide targets for Amazon stock price in 10 years, it suggests the stock could be at $6,490.81 by November 2025. And, according to its Amazon stock forecast in 5 years to 2026, the stock could hit $7,177.35, an increase of 105% over its current level.
Amazon stock long-term forecast: what do the analysts say?
According to Russ Mould, investment director at AJ Bell, Amazon’s status as a leader in fields such as retail, cloud computing and entertainment is why it commands such a high valuation.
However, the company does face its challenges. “Politicians and regulators continue to debate and implement digital sales taxes, or new tax regimes which target multinationals such as Amazon, while the authorities continue to scrutinise the firm’s use of customer data,” he explained.
He also believes higher wage costs are a potential threat, along with competitors in each of its chosen areas who aren’t going away – these include Walmart in retail, Alphabet and Microsoft in cloud computing, and Apple and Disney in entertainment.
In a recent broker note, Doug Anmuth, an analyst at JP Morgan, suggested that Amazon was well-positioned going into the holiday season.
He also said key drivers included AMZN having doubled its fulfilment network since the pandemic began, while the early timing of holiday promotions indicates a strong inventory position.
However, Anmuth believes the company still has further room for expansion.
“Since launching with books in 1995, Amazon has expanded into virtually all retail categories,” he pointed out. “While we estimate Amazon has a 40% market share of overall US e-commerce spend, its penetration by category varies widely.”
Anmuth believes the company is most underpenetrated in jewellery & watches, as well as flowers/greetings. “We believe Amazon’s biggest growth opportunities are in Consumer Packaged Goods (incl. Grocery), Apparel & Accessories, and Furniture/Appliances/Equipment,” he added.
When looking for Amazon 5-year stock predictions, it’s important to bear in mind that analysts’ forecasts can be wrong. Analysts’ projections are based on making a fundamental and technical study of the stock’s performance. Past performance is no guarantee of future results.
It is important to do your own research and always remember your decision to trade depends on your attitude to risk, your expertise in the market, the spread of your investment portfolio and how comfortable you feel about losing money. You should never invest money that you cannot afford to lose.
Amazon stock history: Detailed information
Jeff Bezos, the company’s founder, opened the virtual doors of Amazon’s online store in July 1995, with the company going public just under two years later on 15 May 1997.
The initial public offering price was $18 – or $1.50 when adjusted for the stock splits that occurred in 1998 and 1999. Amazon stock is traded on the Nasdaq. The company’s fiscal year runs until 31 December.
In his most recent letter to shareholders, Bezos said the company had come a long way and now employed 1.3 million people around the world.
It also has more than 200 million Prime members, while more than 1.9 million small and medium-sized businesses sell via the site, making up almost 60% of its retail sales.
“Customers have connected more than 100 million smart home devices to Alexa,” he added.
AMZN stock splits
On 21 July 1999, Amazon announced a 2-for-1 split of common shares, effective on 1 September 1999, for stockholders of record on 12 August 1999.
On 19 November 1998, Amazon announced a 3-for-1 split of common shares, effective on 5 January 1999, for stockholders of record on 18 December 1998.
On 27 April 1998, Amazon announced a 2-for-1 split of common shares, effective on 2 June 1998, for stockholders of record on 20 May 1998.
Whether Amazon is a suitable investment depends on your own objectives. You should conduct your own research. Remember, it’s important to form your own opinion of the company’s prospects and likelihood of achieving analysts’ targets, which can be wrong.
A number of factors dictate whether stock prices rise or fall, including issues with the company and broader macro-economic factors. There are no guarantees. Markets are volatile. You must make your own assessment of AMZN stock, taking in such things as the environment in which it trades and your risk tolerance. And never invest money that you cannot afford to lose.
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