Analysis

Is Amazon Stock Going to $230? 1 Wall Street Analyst Thinks So.

That level is one of the highest among pundits following the company.

Many analysts follow Amazon (AMZN -1.64%) stock. As expected, their price targets can vary considerably. According to data compiled by MarketWatch, the current spread is $160 to $235 per share.

Recently, a pundit tracking the stock moved rather close to that upper limit by raising his fair value estimation. Let’s pick it apart a little to see if it’s too optimistic, just right, or even a lowball prediction.

An Amazon optimist among optimists

In mid-April, MoffettNathanson’s Michael Morton lifted his Amazon price target to $230. Well, maybe “lifted” is overstating the case; “bumped” would be more like it, as his previous level was $228. In making the change, Morton maintained his buy recommendation on the dominant online retailer. That price target implies a 30% upside for the stock over the next 12 months.

Morton’s latest research note on Amazon came barely one week away from the company’s scheduled first-quarter earnings release. He’s particularly confident that the company will make a good showing with advertising revenue, which he anticipates will grow at double-digit percentage rates thanks to ads on its foundational site and what it terms “non-core” spots.

Other reasons for his gradually increasing bullishness include effective cost management, which should result in notably higher margins, and the company’s ever-strengthening regional distribution network.

A multi-headed beast

Yes, Amazon is an easy stock to like, as it’s been a relatively consistent winner over the years with a stock price that always seems to be climbing.

I’m bullish on it too, and Morton’s latest analysis illustrates a major reason why — with its fingers in a great many pies, Amazon has an increasing number of revenue/profitability sources. These include the world-beating Amazon Web Services, the company’s increasingly sticky Prime Video streaming platform, and, of course, those unavoidable retail services. I think this stock is one of the surer bets, especially over the long term, and it’s very much a buy.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon. The Motley Fool has a disclosure policy.

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