Amazon shares are up 55% so far in 2018 and nearly 500% over the past 5 years, which has some investors wondering how much further Amazon can rise. According to Morgan Stanley analysts there’s still plenty of upside to the stock, which is currently at an all-time-high and is approaching $2,000 a share.
The analysts cited growth in advertising revenues, the cloud computing platform and the Amazon Prime service as a bullish case for the stock that could take it to $2,600 a share, implying a 45% upside from Thursday’s close, according to Barron’s.
At $2,600 a share the market cap for Amazon would be $1.3 trillion, and it isn’t just the perceived valuations for those three mentioned areas that have the Morgan Stanley analysts so bullish. Rather it’s the fact that the cash being thrown off by those three business areas will allow Amazon to continue investing, taking them into new areas for new profit potentials.
The Bloomberg article that mentioned the Morgan Stanley bullish case went on saying that despite the 88.85 Price-to-Earnings ratio of Amazon, it remains cheap due to the significant growth opportunities. In fact, they found that out of 52 analysts covering Amazon, just 1 doesn’t recommend owning the stock.
On a more bearish note, market volumes have been declining recently, suggesting less buying of Amazon shares, and the Relative Strength Index has also been falling, which is a sign that momentum is slowing. Finally, the chart currently shows what looks like a rising wedge, which is a bearish technical reversal pattern that could be foreshadowing a drop in the stock.
Sources: Barrons.com, Investopedia.com