Amazon.com, Inc. (AMZN) Stock Is Marching to $3,000

Amazon.com (Nasdaq: AMZN) made headlines earlier this month by briefly reaching a $1 trillion market capitalization. AMZN stock has pulled back a bit since then, but Jefferies analyst Brent Thill says Amazon has a clear path to at least another 50 percent upside by 2020.

According to Thill, Amazon’s key business segments, including core e-commerce, Amazon Web Services public cloud and Amazon Prime subscription services, are showing no signs of slowing down. At the same time, emerging high-growth businesses such as advertising could potentially be big for Amazon in the longer term.

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Thill broke down six of Amazon’s largest businesses to complete a sum-of-the-parts valuation estimate for the stock. After crunching the numbers, Thill says Amazon could easily reach a $3,000 share price within the next two years.

“Amazon has just scratched the surface of its existing markets and we do not believe they need to open new storefronts to achieve our valuation,” Thill says.

Looking ahead, Thill says core retail will remain the centerpiece of Amazon’s business, generating $200.7 billion in revenue by 2021. Thill estimates Amazon’s retail business alone will be worth roughly $1,033 per AMZN share by 2020.

After retail, AWS is the next largest contributor to Amazon’s value. Thill estimates $57.1 billion in high-growth, high-margin AWS revenue in 2020 valued at roughly $734 per Amazon share.

In addition, Thill values third-party seller services at $582 per share, Prime subscriptions at $374 per share, advertising at $271 per share and grocery at $20 per share. All together, Thill’s 2020 valuation suggests a share price of $3,016, or roughly 54.8 percent upside from Amazon’s current share price.

Thill says his estimates do not include more speculative business opportunities for Amazon, such as the $3 trillion health care market.

AMZN stock is already up roughly 65 percent year-to-date, but Thill says his deep dive has convinced him that the stock is anything but expensive at its current levels.

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“We believe the stock remains undervalued given all embedded growth opportunities and the optionality from new initiatives,” he says. “We think Amazon trades at a material discount to peers on growth-adjusted basis and expect multiples to expand over time.”

In the near term, Thill has a “buy” rating and $2,350 price target for AMZN stock.

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