Amazon Stock Soars 60% This Year, Yet Analysts Deem it "Undervalued"

Wedbush's Michael Pachter Sets Aggressive Target Price of $180, Citing Strong Growth Potential

Seattle-based e-commerce giant Amazon's stock has surged by 60% this year, but experts believe it still remains undervalued. Analysis suggests that Amazon's core business segments are being underestimated in the market, leaving room for a potential further increase of over 30%.*

Michael Pachter, an analyst at Wedbush, has recently upgraded his investment rating on Amazon to "outperform" and raised the target price to $180 per share. He has also included Amazon in the list of "Top Investment Ideas," a compilation known to feature promising companies like Apple and Microsoft.

Pachter notes that while Amazon's stock has been undervalued due to concerns over the macroeconomic headwinds impacting e-commerce growth and margin pressures, the future of the e-commerce sector remains optimistic. He emphasizes that despite Amazon's diverse business ventures spanning from cloud computing to streaming, its core remains in e-commerce. Notably, of the $133.4 billion revenue in the second quarter, $85.3 billion (with $53 billion from online store sales and $32.3 billion from third-party seller services) came from the retail segment.

"Given the shift in consumer trends towards online shopping, the e-commerce landscape is improving, and Amazon holds a highly advantageous position with industry-leading order processing infrastructure," Pachter analyzed. The company's same-day and next-day delivery has surged over fourfold compared to 2019.

Regarding concerns about margin pressures, Pachter states, "The resurgence of the digital advertising market supports the sustainable growth potential of Amazon's high-profit advertising business, and the accelerated growth of Amazon Web Services (AWS) in the cloud sector is also positive."

Considering the growth trajectory of Amazon's core business segments and high-margin operations, Pachter asserts that there is still room for the stock price to rise. After a 50% drop in the previous year, Amazon's stock has risen by 60% this year. While other big tech companies like Apple, Tesla, Nvidia, Microsoft, Alphabet, and Meta have experienced significant fluctuations, Amazon's stock has managed to record modest yet consistent gains.

Meanwhile, on Wall Street, out of 55 analysts covering Amazon, a staggering 51 (92.7%) maintain bullish recommendations, including rating upgrades and outperform predictions. The average target price stands at $170.72, reflecting a 27.2% increase from the day's closing price.