Why Amazon.com Stock Still Has Enormous Upside

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Amazon.com, Inc. (Nasdaq: AMZN) stock surged to new all-time highs last week after the company reported a huge earnings beat and said it is raising the price of its annual Prime membership from $99 to $119.

Amazon stock gained 3.6 percent following the earnings beat and is up 35 percent so far this year, but Macquarie analyst Ben Schachter says there is still at least another 33 percent upside to Amazon stock in the next year.

According to Schachter, Amazon’s first quarter was so impressive that the stock will leapfrog Apple (AAPL) and beat the iPhone maker to a historic milestone.

“We believe that even without margin expansion in core retail, the other businesses can drive significant profit growth over the coming years and will make AMZN the first trillion-dollar company,” Schachter says.

Amazon’s market capitalization of around $732 billion is well short of Apple’s market cap of $820 million. Apple is the most valuable public company in the world by market cap.

Schacher says Amazon is exceeding expectations across the board and the that only legitimate risk to the company’s outlook is political interference.

“As its core, first- and third-party retail sales continue to take significant share from virtually all competitors, [and] its subscription business, AWS and advertising business are all exceeding expectations markedly,” Schachter says.

Bank of America analyst Justin Post says Amazon’s cloud and advertising businesses are making so much money that the company can’t even spend all the profits.

“Amazon’s share in its key markets continues to expand, supported by strong fulfillment infrastructure and Prime lock-in, while the earlier stage higher-margins businesses of AWS and advertising are contributing to more meaningful profit growth,” Post says.

Following Amazon’s first-quarter report, Bank of America more than doubled its full-year 2018 EPS forecast for Amazon from $5.89 to $11.83.

“We think Amazon is well-positioned to capitalize on the global growth of e-commerce and other secular trends such as cloud computing, online advertising, connected devices, and mobile commerce,” Post says.

Macquarie has an “outperform” rating and $2,100 price target for Amazon. Bank of America has a “buy” rating and $1,840 target for AMZN stock.