Amazon’s Stocks Soar in the Midst of the Pandemic – Lee Chandler

Second quarter earnings of the e-commerce and cloud services giant Amazon have greatly surpassed Wall Street consensus estimates. Ever since the coronavirus began to rapidly plague the entire world, the company has seen unprecedented demand by homebound consumers, particularly older generations, who are in urgent need of Amazon’s products and services more than ever. At least 27 analyst groups at large firms including J.P. Morgan, Morgan Stanley, and Goldman Sachs have raised their price target on this online retail company’s shares, meaning that they are anticipating even larger share growth as people continue to remain safer at home.

Since March 1, Amazon’s shares have been up 63%, leading the pack of tech-giant competitors including Facebook and Alphabet. Amazon’s expected earnings per share forecasts for the second quarter were set at $1.46 per share, but the company proved its ability to tremendously outperform analysts’ expectations, earning $10.30 per share. Additionally, total second quarter revenues trumped the estimated increase of 28.6%, escalating to 40% year-over-year growth and reaching $88.91 billion.

But wait, there’s more: analysts are predicting that stock prices will exceed $4,000 in the next year. Furthermore, Goldman Sachs analyst Heath Terry even raised his estimated stock price up to $4,200 because he believes that the expansion of their distribution centers will allow for even greater growth and that the market is prematurely undervaluing the company’s long-term capabilities. Because of Amazon’s investments towards perfecting its speedy Prime Membership service and overall infrastructure, Terry believes that Amazon has mastered the ability to swiftly cover the order fulfillment process and meet delivery dates in the long run as they are currently recovering from receiving an influx of orders.

While Amazon’s CEO Jeff Bezos has received backlash in the past few months regarding antitrust as well as the lack of protection among its employees in our pandemic-stricken society, Amazon is expected to spend at least $2 billion during the third quarter on all safety expenses towards its warehouse employees. Even with these expenses, Amazon expects its net sales to be between $87 billion and $93 billion; in terms of year-over-year increase, that is between 24% and 33%. Additionally, the company has predicted a range of operating income of $2 billion and $5 billion, which also takes the $2 billion expense for coronavirus protection measures into consideration. As for the antitrust investigation by members of Congress concerning Amazon’s domination over the consumer space, Wall Street has continued to cheer for them on the sidelines and encourages the company to soar to new heights.

 

 

 

 

 

 

 

References

Dhaliwal, Shivdeep. “Jeff Bezos Worth Skyrockets As Amazon Stock Soars.” Benzinga, Benzinga, 15 Apr. 2020, www.benzinga.com/news/20/04/15803516/jeff-bezos-worth-skyrockets-as-amazon-stock-soars#:~:text=Amazon%20stock%20rose%205.6%25%20to,became%20richer%20by%20%242.3%20billion.

Duprey, Rich. “Goldman Sachs Analyst Hikes Amazon Price Target 27% to $3,800 on E-Commerce Growth.” The Motley Fool, The Motley Fool, 20 July 2020, https://www.fool.com/investing/2020/07/20/goldman-sachs-hikes-amazon-price-target-27-to-3800.aspx

Garcia, Tonya. “Amazon Is Making Gains with Older Consumers as More People Turn to e-Commerce during COVID-19.” MarketWatch, MarketWatch, 3 Aug. 2020, www.marketwatch.com/story/amazon-is-making-gains-with-older-consumers-as-more-people-turn-to-e-commerce-during-covid-19-2020-07-31.

Ivanova, Irina. “Wall Street Betting Amazon Stock to Soar Past $4,000 in next Year.” CBS News, CBS Interactive, 31 July 2020, www.cbsnews.com/news/amazon-stock-price-2020-wall-street-prediction-antitrust/.

McKenna, Beth. “Amazon’s Earnings Trounce Expectations: 5 Metrics You Should See.” The Motley Fool, The Motley Fool, 30 July 2020, www.fool.com/investing/2020/07/30/amazons-earnings-trounce-expectations-5-metrics-yo.aspx.

Palmer, Annie. “Amazon Sales Soar as Pandemic Fuels Online Shopping.” CNBC, CNBC, 30 July 2020, www.cnbc.com/2020/07/30/amazon-amzn-earnings-q2-2020.html.

Sparks, Daniel. “Apple, Facebook, and Amazon All Just Obliterated Earnings Estimates.” The Motley Fool, The Motley Fool, 31 July 2020, www.fool.com/investing/2020/07/31/apple-amazon-and-facebook-all-just-obliterated-ear.aspx

 

Clara Yang

University of Southern California | Class of 2022
Marshall School of Business | Business Administration Major | Enterprise Information Systems Minor
(408)585-8617 | [email protected]

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