If you think Amazon.com, Inc. (NASDAQ:AMZN) stock could climb even higher in 2016, you are not alone. On Tuesday, January 12, Credit Suisse raised its price target on Amazon stock from $777.00 to $800.00, almost 30% higher compared to Monday’s closing price.
Can AMZN Stock Go to $800?
In particular, Credit Suisse believes that Amazon’s cloud computing platform, “Amazon Web Services” (AWS), will continue to enjoy strong growth. The brokerage said that the amount of capital needed to run AWS has peaked and may start to decrease, which would boost profitability in this area. (Source: “Amazon Stock Target Raised to $800 as AWS, Shipping Costs Wane,” MarketWatch, January 12, 2016.)
Indeed, AWS has become a huge growth driver for AMZN stock. Piper Jaffray conducted a survey of 135 chief information officers (CIOs) and found that AWS continued to take the greatest mindshare. Analysts attributed AWS’s success to its superior functionality, scalability, rapid innovation, and developer loyalty. According to the survey, 87% of CIOs said they would spend more on AWS in 2016 compared to 2015. (Source: “Amazon AWS Continues to Capture CIO Mindshare—Piper Jaffray,” StreetInsider.com, January 11, 2016.)
Moreover, Credit Suisse is anticipating higher margins from Amazon’s e-commerce business. Since Amazon has been building up its own logistical infrastructure, lower shipping costs in the future could improve its operating results.
Amazon has become much more than just an e-commerce company these days. Its products and services range from electronic devices to cloud computing and even entertainment and video streaming through “Amazon Prime.”
It is safe to say that the key to growing one’s subscriber base in the on-demand video streaming business is to have a good amount of quality content. On that front, Amazon is doing quite well.
At the 2016 Golden Globes ceremony, Amazon’s original TV show Mozart in the Jungle picked up two awards for the best comedy or musical TV series and the best performance by an actor in a comedy or musical TV show. Its competitor Netflix, Inc. (NASDAQ:NFLX), despite having some solid nominations, came home empty-handed from this year’s Golden Globes. (Source: “At 2016 Golden Globes, Amazon Wins Best TV Comedy, But Netflix Goes Home Empty-Handed,” Forbes, January 10, 2016.)
Note that to enjoy Amazon’s TV shows and movies, you don’t need to pay extra—as long as you are a Prime member. For $99.00 a year, Amazon Prime membership gives you free unlimited two-day shipping on millions of goods in the U.S. and free same-day delivery to certain metro areas on a selection of items. Moreover, Prime members also get to enjoy video and music streaming services, digital book rentals, and unlimited cloud photo storage. On a monthly basis, the price you pay for all that is less than what Netflix charges for just its video streaming service.
No doubt, with all that great stuff, Amazon Prime is bound to be successful. Some analysts believe that 50% of all U.S. households would be Prime subscribers by 2020. Since Prime members also tend to spend more on Amazon.com compared to non-prime members, surging Prime membership is giving a strong boost to Amazon’s e-commerce business. (Source: “Half of US Households Will Use Amazon Prime by 2020, Predicts Analyst,” Business Insider, last accessed January 12, 2016.)
The Bottom Line on AMZN Stock
Bottom line: Amazon is firing on all cylinders.
The company even has its own $180.00 voice-controlled device called “Echo” that works as a digital assistant. The device turned out to be surprisingly successful and Amazon is working on a smaller, portable version of the device, codenamed “Fox.” (Source: “Amazon to Release Portable Version of Echo Speaker in Coming Weeks,” The Wall Street Journal, January 11, 2016.)
It’s not certain whether AMZN stock could reach $800.00 in the near-term, but with success in online shopping, video streaming, and web services, as well as growing sales in tablets and voice-controlled devices, you don’t really want to bet against it.