AMZN Stock: $4,250 Price Target By Goldman Sachs

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The shares of Amazon.com, Inc. (NASDAQ: AMZN) have received a price target of $4,250 by Goldman Sachs. These are the details.

The shares of Amazon.com, Inc. (NASDAQ: AMZN) have received a price target of $4,250 by Goldman Sachs. And Goldman Sachs analyst Eric Sheridan had initiated coverage of Amazon.com with a “Buy” rating.

Sheridan had initiated coverage of the U.S. Internet sector with a selectively positive view. And Sheridan believes that the industry still has ample opportunities for secular revenue growth and increased operating efficiencies on the back of building scale in the coming years.

Going forward, Sheridan sees Amazon as a core long-term holding for Internet investors. And Sheridan believes that the company has exposure to multiple long-term runways that can sustain more than 15% growth while also producing margin expansion for the long run.

Disclaimer: This content is intended for informational purposes. Before making any investment, you should do your own analysis.

What If You Had Invested In Amazon Stock Instead of an Amazon Prime Membership?

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An Amazon Prime membership almost seems like a necessity these days, as both online shopping and stay-at-home entertainment viewing have picked up dramatically in popularity. Many customers view the annual fee for an Amazon Prime membership as relatively inexpensive for what they get out of it. Yet, in spite of all the benefits an Amazon Prime membership provides, there’s no doubt that an investment in Amazon stock would have been a much better use of that money, particularly in the first year that Amazon Prime debuted. Here’s a look at how much money you would have earned if you put your annual Amazon Prime membership fee into Amazon stock instead.

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Cost of Amazon Prime

When Amazon Prime first launched in 2007, it cost members $79 per year. The price has jumped since then, first to $99 and then to its current price of $119.

Price of Amazon Stock

As of Jan. 3, 2007, the first year that Amazon Prime was introduced, the price of Amazon stock was $38.70. For the price of an Amazon Prime membership, customers could have instead purchased 2.04 shares of Amazon stock.

Read: Amazon Stock: Is It a Good Buy Right Now?

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Current Value Today

As mentioned above, the cost of an Amazon Prime membership has jumped from $79 to $119, a jump of more than 50%. This means that today’s customers pay more than 50% more than the original price of an Amazon Prime membership in 2007. But for those wise investors who instead bought Amazon stock in 2007 instead of subscribing to Amazon Prime, the results have been nothing short of incredible. As of the close of business on Aug. 10, shares of Amazon stock traded at $3,320.68. That represents an astonishing gain of nearly 8,500%. In other words, the $79 that Amazon Prime subscribers could have instead invested in Amazon stock would now be worth $6,774.19, representing a profit of about $6,695. If those investors had been lucky enough to sell out at Amazon’s all-time high price of $3,773.08, those shares would have been worth $7,697.

Story continues

See: What $1,000 Invested in Stocks 10 Years Ago Would Be Worth Today

Explore: Why It’s Never a Bad Idea To Invest In Apple and These Other Companies

The Bottom Line

It’s not unusual for a stock investment to outperform a common expense. After all, expenses represent consumption, whereas investment offers the potential to generate profits over time. However, the unbelievable performance of Amazon stock over the years certainly shows that owning a portion of the company is a much wiser move than simply using its products. With $6,695 in profits, investors in Amazon stock at the start of 2007 could afford more than 56 years of Amazon Prime membership at the current price of $119 annually. Of course, just like Amazon stock was a better bet than Amazon Prime membership in 2007, analysts feel that Amazon’s stock price can continue to run. Currently, analysts have a consensus “strong buy” rating on the stock, with an average 12-month price target of $4,212.87. This represents a potential gain over the next year of nearly 27%. While no one is suggesting that you should give up your Amazon Prime, if the analysts are correct in their predictions, adding some money to Amazon stock as well could more than pay for the cost of your annual membership.

Is Amazon.com, Inc.’s (NASDAQ:AMZN) Stock’s Recent Performance Being Led By Its Attractive Financial Prospects?

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Amazon.com’s (NASDAQ:AMZN) stock is up by a considerable 5.3% over the past month. Given the company’s impressive performance, we decided to study its financial indicators more closely as a company’s financial health over the long-term usually dictates market outcomes. Specifically, we decided to study Amazon.com’s ROE in this article.

ROE or return on equity is a useful tool to assess how effectively a company can generate returns on the investment it received from its shareholders. In other words, it is a profitability ratio which measures the rate of return on the capital provided by the company’s shareholders.

How Do You Calculate Return On Equity?

Return on equity can be calculated by using the formula:

Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity

So, based on the above formula, the ROE for Amazon.com is:

26% = US$29b ÷ US$115b (Based on the trailing twelve months to June 2021).

The ‘return’ is the profit over the last twelve months. That means that for every $1 worth of shareholders' equity, the company generated $0.26 in profit.

What Has ROE Got To Do With Earnings Growth?

We have already established that ROE serves as an efficient profit-generating gauge for a company’s future earnings. We now need to evaluate how much profit the company reinvests or “retains” for future growth which then gives us an idea about the growth potential of the company. Generally speaking, other things being equal, firms with a high return on equity and profit retention, have a higher growth rate than firms that don’t share these attributes.

A Side By Side comparison of Amazon.com’s Earnings Growth And 26% ROE

First thing first, we like that Amazon.com has an impressive ROE. Secondly, even when compared to the industry average of 20% the company’s ROE is quite impressive. So, the substantial 48% net income growth seen by Amazon.com over the past five years isn’t overly surprising.

As a next step, we compared Amazon.com’s net income growth with the industry, and pleasingly, we found that the growth seen by the company is higher than the average industry growth of 33%.

NasdaqGS:AMZN Past Earnings Growth September 13th 2021

Earnings growth is a huge factor in stock valuation. What investors need to determine next is if the expected earnings growth, or the lack of it, is already built into the share price. By doing so, they will have an idea if the stock is headed into clear blue waters or if swampy waters await. What is AMZN worth today? The intrinsic value infographic in our free research report helps visualize whether AMZN is currently mispriced by the market.

Is Amazon.com Making Efficient Use Of Its Profits?

Conclusion

Overall, we are quite pleased with Amazon.com’s performance. In particular, it’s great to see that the company is investing heavily into its business and along with a high rate of return, that has resulted in a sizeable growth in its earnings. With that said, the latest industry analyst forecasts reveal that the company’s earnings growth is expected to slow down. To know more about the latest analysts predictions for the company, check out this visualization of analyst forecasts for the company.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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