Amazon’s stock is up over 40% for the year, but positive vibes from Wall Street analysts could keep pushing the price higher. Wells Fargo analyst Ken Gawrelski recently heaped praise on the online retail giant.
Gawrelski gave Amazon an ‘overweight’ rating with a $159 price target. Amazon has certainly been a passenger in the broader tech rally (the Nasdaq 100 is up over 30% for the year), but the company has been helping its own stock amid improved profit margins stemming from its Amazon Web Services (AWS).
Tailwinds can only improve as the central bank looks to get inflation under control. As such, more big tech companies like Amazon could return to increased cloud spending, according to Gawrelski’s forecasts.
Additionally, increased efficiency measures could continue to help Amazon’s case for more bullishness. As the aforementioned Street article said, “A smaller fulfilment center footprint, as well as its ongoing transition to regional — as opposed to national models — could also drive as much as $6.5 billion in savings this year, a figure that represents around a third of the group’s operating income.”
This can prop up Amazon in the short-term, but Gawrelski also notes that competition from Microsoft’s Azure puts the long-term optimism in question.
“We are tactically positive on the AWS business given second half reacceleration potential, but see market share trend versus Azure obscuring longer-term optimism,” Gawrelski said. “Additional tailwinds for operating income will come from warning inflation, cancellation of (fulfilment center) build plans (and) headcount reductions”.
2 Ways to Play Amazon
Traders looking to play additional strength in Amazon can look to single-stock exchange-traded funds (ETFs) from Direxion Investments that add a dose of 50% more leverage. In particular, the Direxion Daily AMZN Bull 1.5X Shares (AMZU) seeks 150% exposure to Amazon stock, giving bullish traders added leverage to extract more gains from their convictions.
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