Amazon’s (NASDAQ:AMZN) share price may be reaching dizzying new heights, but if history is to be a guide, the stock is due for a major correction, says Ross Healy, portfolio manager for MacNicol & Associates Asset Management in Toronto.
Amazon saw its share price top $1,650 for the first time in trading today, smashing through to a high of $1,665. (All figures in US dollars unless noted otherwise.) That’s up more than 40 per cent year to date.
But the e-commerce giant’s success story has come with a few twists and turns along the way, says Healy, who argues that despite the upward momentum, Amazon has a history of significant pull-backs.
“It has some nice trading potential [but] when I look at the history of Amazon going back all the way to when it started, it has had a couple of spectacular market corrections. Spectacular,” he said, in conversation with BNN Bloomberg.
“What’s interesting is that the stock comes back quite quickly. So, maybe you get this wipeout and you may have to wait about three or four years and it comes roaring back and drives on to new highs. So, at some point, there’s going to be another spectacular wipeout. Why? Because there always are with these kinds of stocks,” he says.
But exponential growth continues to be the name of the game for Amazon, as it spreads it reach now by taking aim at the grocery and apparel sectors. Beyond its Whole Foods acquisition, Amazon currently owns over 100 of its own brands, points out investment banker Youssef Squali of SunTrust Robinson Humphrey who says the company’s share price is heading to $2,000.
“I think they’re taking a page out of the Costco playbook, where you have very good quality combined with a great price. We expect that private label today is roughly a $10 billion business for Amazon and we think that over the next four years, it’ll more than double,” says Squali to CNBC.
Amazon was not immune to the tech bubble of the late 1990s and early 2000s, as its share price went from a high of $85.00 in early 2000 to as low as $5.50 by October of 2001.
“Right now, however, Amazon is just destroying the retail industry in North America if not the world. So, the growth will just continue on, I think, very, very strongly,” says Healy.
Disclosure: Cantech’s Nick Waddell owns shares of Amazon.