It’s been nearly a month since Amazon released its 2021 earnings. The company has regained some of its market value, but it's still far from historical highs. Time to buy?
Amazon’s fourth-quarter earnings report surprised even the most bearish analysts. On February 3, the company reported significant increases, mostly thanks to its cloud segment, AWS, and its Rivian stake.
The company's e-commerce segment also presented surprisingly good results — consequences of a good holiday season — that eased fears of a retail slowdown. Add to that results from advertising and a Prime membership price hike and it's hard not to be optimistic.
So is now the best time to buy some AMZN?
Quick Gains From Amazon?
If 2021 taught us anything, it's that a good investment isn't actually "good" until the market realizes it is.
So did investors who bought the Amazon dip last year make a good investment? In my opinion, absolutely. Amazon is a massive company with great growth potential, and it was (and still is) far below Wall Street’s price target.
However, it's also true that investors who bought the dip last year didn’t make any real gains. And unless Amazon presents us with some rock-solid growth prospects in the first quarter of 2022, I don’t think buying AMZN in March will quickly convert into massive returns.
Amazon's stock price seems to be more sensitive to e-commerce growth than it is to any of its other segments. And the performance of the retail industry this year is currently anything but clear. On top of ongoing supply-chain constraints and labor shortages, the war between Russia and Ukraine might make U.S. inflation even worse than predicted.
Good Enough for Warren Buffett
I like to hope that, when I buy a stock, my bullishness is similar to Warren Buffett’s — even though he wasn’t personally responsible for adding AMZN into Berkshire’s portfolio.
According to WhaleWisdom’s estimates, Buffett’s team paid an average of $1,792 per share for Amazon three years ago. Portfolio managers could sell shares today at $3,075 each and gain over 71% on their investment. That's quite decent. The fact that Berkshire is still long on AMZN tells me it believes in the company's long-term potential.
Wall Street’s Perspective
Many top Wall Street firms believe Amazon will start recovering its mojo by the second half of 2022. After Amazon’s last earnings report, Goldman Sachs’ Eric Sheridan said the company produced a "solid set of results and addressed directly many of the key investor debates in the past few months," reaffirming it as Goldman’s 2022 top pick.
Based on the 29 TipRanks analysis covering AMZN, Amazon is a unanimous strong buy. Their current price targets range between $3,600 and $5,000, with an average of $4,200, implying a 37% upside.