At least 38 analysts on Wall Street are currently offering a 12-month price target for Amazon (NASDAQ: AMZN) across the last quarter. This installment lists the average price target for Amazon at $180.13. This sits comfortably between the high forecast of $212.50 and the low price forecast of $140.00. This updated average price target represents a positive change of 48.65 percent, up from the previous average price of $121.18.
With such promising growth, the vast majority of these analysts appear to agree that Amazon should have a Strong Buy Rating.
Looking back at the beginning of the quarter, this appears to be consistent with analyst ratings. More than 80 percent of analysts gave the stock a rating of Buy. Fewer than 10 percent advised the stock was overweight while only a couple issued a Hold or Sell rating. Again, this has remained unchained, effectively.
Stock Split Slices Share Price
One reason Amazon stock has such a significant rating might be the recent stock split the company issues. Indeed, very recently the e-commerce giant issued investors 20 shares for every share each investor had been holding. Consequently, this caused the share price to plummet. After many years of Amazon's share value trading in the range of $1,000, it was certainly a shock to suddenly see share prices hovering near $120.
Of course, a dramatic drop in price for an individual share of Amazon stock on a week-to-week basis does not necessarily mean it is time to panic, especially for investors. In reality, the value of the stock, overall, is not necessarily any lower than it has been. Furthermore, the value proposition for Amazon shares is roughly the same as it was the week prior to Amazon announcing the split. Some might argue, then, that the stock split is somewhat irrelevant in terms of share value.
Buy Rating Contributing Factors
All that said, there are a handful of reasons why this is a good time to buy stock in Amazon. Obviously, one reason to buy the stock now is that the price sits at about 10 percent of its previous price. But, again, Amazon stock is not cheap because of the split; instead it is cheap because it just so happens to be trading down from its peak nearly a year ago. Down approximately one-third, it is poised for strong earning potential as we approach the heavier shopping seasons of fall and winter.
And that is actually another reason this is a good time to buy Amazon stock. While fiscal first quarter in the e-commerce space was a dismal one, on the whole, revenue for Amazon North America grew by only 8 percent. On top of this, Amazon posted an operating loss of $1.6 billion in the quarter. This is dramatically different from the $3.5 billion in operating profit for the quarter year-over-year.
Furthermore, global economic obstacles will continue to hinder operations, particularly for Amazon. Fuel prices continue to grow, which means sipping costs are also on the rise. And since Amazon expanded a little too much too fast during the pandemic, when pandemic stimulus gave households a little bit of disposal funds, they have had to sublease some of their space to compensate.
AWS Drives Profit for Amazon
But Amazon remains the largest e-commerce space and as people return to a new normal, business should follow. At the same time, Amazon's biggest profit region is actually its cloud infrastructure unit, Amazon Web Services. In the face of major setbacks in so many other segments, AWS posted revenue growth of 37 percent in Q1 2022—to $18.4 billion—while currency-neutral operating income grew by more than 52 percent, to $6.5 billion.
This has provided Amazon with an impressive profit margin of 35 percent. And it is only the beginning: AWS continues to expand its product offerings and also introduce new services like Amplify Studio. This has helped them to attract powerful new customers like Telefonica and Boeing, as well as the owner of the Toronto Maple Leafs NHL team.
Amazon's cloud infrastructure business is so important, in fact, that when Jeff Bezos stepped down as CEO, he was replaced by AWS architect Andy Jassy.
A Promising But Uphill Climb
The remaining months of 2022 will certainly not be simple or easy for Amazon, but they are definitely positioned to survive the current global pressures. From a booming cloud infrastructure service to a promising—albeit, likely, slow—recovery in the online retail space, Amazon's stock value has nowhere to go but up. Of course, these gains will probably not be immediate, so anyone looking to invest needs to in it for a little while to realize the kind of potential analysts believe Amazon stock can promise today.