Amazon (AMZN) stock has room to grow, with the e-commerce giant’s cloud service likely to be a positive driver in 2021, according to one BofA analyst.
Justin Post raised his price target on the stock to $4,000 from $3,650, while maintaining a Buy rating. Shares were trading 2% higher during Thursday’s session.
“Amazon remains one of our top Online penetration stocks as eCommerce is still only 20% penetrated following a big bump in 2020, and the shift to the Cloud is still in early stages,” Post wrote in a note to investors.
Shares of the e-commerce giant were up 74% last year vs, the S&P 500 (^GSPC), which rose 16%.
The stock has recently underperformed vs the Nasdaq (^IXIC) with shares down 6% in the 4th quarter vs. an increase of 8% for the tech heavy index. This is due to “slowing eCommerce growth since the mid-summer peak, concerns on tough comps starting in 2Q'21, and additional regulatory concerns with anti-big tech sentiment in Congress,” wrote Post.
However those retail comp concerns should abate by the third quarter of this year. The analyst expects Amazon Web Services (AWS) “to be a positive driver in 2021.”
Post notes Amazon benefits from “diversified revenue streams like eCommerce, Cloud, grocery, advertising and subscription services.”
He continues, “we think Amazon stock could hold up better than eCommerce peers if there is a rotation to vaccine/reopening stocks,” as lockdowns ease and more people get vaccinated against COVID-19.
“Amazon has invested heavily in 2020 to build out its delivery capacity (rapid build in local delivery stations), which could help support new product and services launches,” wrote Post.
BofA’s estimates for the company’s 4th quarter results are the street consensus, and Post believes a first quarter beat is possible given stimulus checks and continued stay at home orders.
Ines covers the U.S. stock market. Follow her on Twitter at @ines_ferre