Amazon.com’s stock has been a darling for much of the pandemic—and there’s reason to believe that it could also post a strong 2022.
The e-commerce giant has captured the attention of Barron’s associate editor Andrew Bary, who recently named Amazon (ticker: AMZN) one of his top stock picks for the new year.
Part of the reason for Bary’s bullishness? Wall Street projects that Amazon will deliver annual revenue gains of more than 20% and expand its margins over the next two to three years.
Bary also hopes that the company will do a stock split, which would increase the number of shares available and decrease the cost per share proportionately. With shares currently trading above $3,000 apiece, doing a 10-for-one split would mean investors would need to fork over a more palatable $300 to own a share of Amazon. When company stock prices get to be too high, it can be prohibitively expensive for new investors to buy shares.
But there are other reasons to be excited about Amazon. While the company’s e-commerce and entertainment offerings, like Prime Video and Kindle, may be household names, Amazon’s real power lies in its web services business, which some analysts value at $1 trillion. That figure would make Amazon’s other vibrant business segments worth roughly $700 million combined—a relatively small price tag for well-known brands.
Granted, Amazon’s shares may look expensive at first glance: The stock recently traded around 60 times forward earnings—triple the market multiple. But if investors consider the company’s status as the leader in both web services and e-commerce, the stock may actually be undervalued.
“There are multiple plays inside Amazon right now,” Bary says, referencing its advertising, e-commerce, and web services operations.
So far, 2022 hasn’t been too kind to Amazon: Shares are down about 9% this year, with the stock being tied up in the tech wreck that put the Nasdaq Composite into correction territory Wednesday. But Amazon is known for playing the long game—and recent weakness may provide reason to take a look at its stock.
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