eCommerce giant Amazon (Amazon Stock Quote, Chart, News NASDAQ:AMZN) was a runaway success story in 2020 but don’t expect that to let up come New Year’s, says portfolio manager Bruce Murray, who predicts the stock will top $4,000 in 2021.
“Amazon was perfectly positioned for the pandemic, and its empire continues to flourish. They’ll do $400 billion in sales next year,” said Murray, CEO of the Murray Wealth Group, speaking on BNN Bloomberg on Tuesday.
“And the good thing happening in Amazon is businesses like AWS which have been growing up underneath the retail business and are going to exceed 25 per cent of sales next year,” Murray said. “Those have much higher margins on them so Amazon’s profitability is actually increasing as the company goes forward.”
“We see Amazon as an unstoppable juggernaut for the next 12 years as it enters new verticals. They just recently entered pharmacy, they have Prime videos, so if it holds its multiples the stock will easily exceed $4,000 in the next 12 months,” Murray said.
Earlier this week, Amazon announced preliminary numbers on its Black Friday through Cyber Monday sales, saying it’s so far been the best year ever for the consumer spending kickoff. Amazon said independent businesses selling on its platform registered over $4.8 billion in sales worldwide over the long weekend.
“In a holiday season unlike any other, it’s clear that customers still want great deals on gifts for their loved ones or a little something extra for themselves, and we’re glad to help deliver smiles throughout the season,” said Jeff Wilke, CEO of Amazon Worldwide Consumer, in a blog post on Tuesday.
Last month, Amazon launched its Pharmacy prescription delivery service, a year after putting out its own line of over-the-counter drugs and one which signals Amazon’s full entry into the sector. The market response was immediate as traditional pharmacy names relying on bricks and mortar stores like Walgreens Boots and CVS endured sharp share price drops.
Amazon said the COVID-19 pandemic has led to a preference for delivery services for medications rather than risk the trip to the drugstore.
“We understand the importance of access to affordable medication, and we believe Prime members will find tremendous value with the new Amazon Prime prescription savings benefit,” said Jamil Ghani, Vice President, Amazon Prime, in a November 17 press release. “Our goal is for Prime to make members’ lives easier and more convenient every day, and we’re excited to extend the incredible savings, seamless shopping experience, and fast, free delivery members know and love with Prime to Amazon Pharmacy,”
Aside from a few ups and downs in recent months, Amazon’s share price is now at even since mid-July, but the overall return for 2020 is still huge at 73 per cent, currently.
But the technicals look good for AMZN, according to CNBC Mad Money host Jim Cramer, who thinks all of the so-called FAANG stocks should do well over the final stretch of 2020.
“This is the point on the calendar when money managers crowd into the year’s biggest winners to show their clients how smart they are,” Cramer said on Tuesday. “That means winners like Facebook, Amazon, Apple, Netflix and of course, I think Google, should keep winning, at least for the next four weeks.”
Cramer got his point backed up by chart analyst and RealMoney.com contributor Carolyn Boroden, who said Amazon, currently at the $3,200 mark, has a key support level at $2,950.12 and has price targets of $3,461 and $3,737 at the high end.
As with other members of the Big Tech group like Facebook, Apple and Google, concerns over regulatory charges and anti-trust investigations are a perennial issue for Amazon investors. This week, the Canadian federal government said it will start levying a sales tax on foreign-owned companies offering digital services such as streaming and mobile apps.
But Murray says adding a tax or levying a fine on the FAANG companies won’t amount to much of a hindrance at the end of the day.
“I think it could clip their wings but I don’t think seriously,” Murray said. “I’ve seen in my investment career when government started going after companies like IBM in the 1970s or Microsoft in the 1990s — usually it was just a Good Housekeeping Seal of Approval being put on, saying these companies are so profitable we’ve got to get our share.”
“And the businesses just drive on right through. They’re very strong businesses and they can raise their prices to accommodate the taxes,” Murray said. “Probably Amazon should be paying sales tax in Canada, but is that going to change [your purchasing] if you have to pay sales tax by going to the store or ordering it on Amazon? I don’t think the sales tax is going to change your purchase opinion.”
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