Amazon may be the ultimate coronavirus-proof stock
In fact, shares of Amazon have surged about 30% this year and finished at a new all-time closing high of $2,410.22 on Friday.
The Jeff Bezos-led company is now worth $1.2 trillion — about the same as Apple and trailing only cloud rival Microsoft in the battle for the most valuable publicly traded firm in the United States.
Amazon — along with fellow retail leader Walmart — is expected to be a big winner as many Americans shelter in place and order nearly everything they need online.
“While its global supply chain and delivery/fulfillment services could be somewhat hobbled by the Covid-19 disruption, Amazon should see an e-commerce surge on increased online shopping amid in-home confinement,” said CFRA analyst Tuna Amobi in a report Friday.
The company is also benefiting from some of the same stay-at-home trends that are boosting streaming king Netflix. Amazon Prime subscribers can also binge watch programs on the company’s Prime Instant Video service.
All of this bodes well for Amazon as it gets ready to report its first quarter earnings on April 30. Analysts expect that the company will report a more than 20% increase in sales — to a whopping $73 billion.
The company’s formidable presence in the extremely lucrative and highly profitable cloud business through its Amazon Web Services unit is another plus for the stock, said John Conlon, director of equity strategies with People’s United Advisors.
Almost every analyst that covers Amazon rates it a buy
These factors are among the many reasons the stock is still adored by nearly every Wall Street analyst that covers the company.
According to data from Refinitiv, 49 of the 51 analysts who follow Amazon have the stock rated a buy. (Two have it as a hold.)
Wall Street analysts are typically very bullish when it comes to large cap companies, but this level of near unanimous approval is almost unheard of.
A handful of them have sell ratings on Apple, Facebook and Netflix, for example. But analysts can hardly contain their bullishness for Amazon.
Goldman Sachs analyst Heath Terry boosted his price target for Amazon to $2,900 a share on Thursday, 20% above the stock’s current price and the highest price target on Wall Street for the company.
Terry said in a report that “the increase in demand [for] the company’s retail, AWS, and ads businesses…and Amazon’s ability to meet the challenges of this demand” will boost its long-term growth rate and make the company even tougher to compete against.
“We believe the market continues to underestimate the long term value of the Amazon platform,” Terry added, saying that it will likely remain a leader in both online retail and cloud computing.
Risks remain but investors shrug them off
Still, aren’t there some risks for Amazon? Well, the company could come under increased scrutiny for its labor practices. Bad headlines may dent its reputation with consumers and potentially lead them to shop less at Amazon and Whole Foods and ditch their Prime memberships.
There is also the potential for more regulatory crackdowns on the company, especially if President Trump is re-elected. Trump has made it no secret that he is not a fan of Bezos, who personally owns The Washington Post, a newspaper that is often critical of Trump and his policies.
AWS lost out on the chance to snag a huge Pentagon contract that went to Microsoft’s Azure cloud unit last year. Amazon sued to contest the decision, arguing that Trump’s animus toward Bezos may have been a factor in the decision. The Defense Department has since said it will reevaluate its decision.
But Amazon has weathered Trump’s firestorm and other negative news coverage so far.
“The reason Amazon is the focus of so much controversy is because it is so successful and dominant,” said Tom Plumb, manager of the Plumb Balanced Fund, which owns shares of Amazon.
“We don’t know what people are going to buy, but they are likely to buy it from Amazon,” Plumb added.