Morgan Stanley Sees a Path for Amazon.com (AMZN) to Hit $6,000 In the Next 12 Months
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Morgan Stanley analyst Brian Nowak reiterated an Overweight rating and $4,500.00 price target on Amazon.com (NASDAQ: AMZN) but noted that with the company's scaling profitability, it could be valued using a P/E multiple on GAAP earnings in the near future. This opens the debate for the right multiple and the analyst sees a case that would make shares worth $6,000 in 2023. Leading retailers and consumer goods staples have PEG multiples of 3x. Wouldn't Amazon be deserving of this as well?
The analyst stated "Bull Case Closer to Retailers/Staples Implies ~$5,000-$6,000 Share Price: AMZN currently trades at ~1.2X '22 on a PEG basis, a ~30% discount to its median tech peer group. As shown, even valuing AMZN at a 1.7X PEG (in line with mega cap tech) would imply a $4,500 share price as '23 earnings come into view. But this PEG would still be a ~45% discount to WMT...and we argue AMZN could warrant a higher PEG" "These factors could justify a higher PEG, and a PEG of ~2-2.5X would imply a ~$5,000-$6,000 share price within the next 12 months (potentially a double from here)."
1) Larger TAM and growth runway across multiple business lines (global retail, B2B, advertising, logistics, healthcare, public cloud, autonomous driving, etc)
2) The high and rising value of the Prime subscriber base (recurring subscription revenue and rising spend/household)
3) High potential for margin expansion and optionality for even higher earnings power with scale and
4) A broader shareholder base across more industries (and accompanying larger sources of capital) that could compare AMZN to non-tech industries
Shares of Amazon.com closed at $3222.90 yesterday.
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