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2019 is nearly here, and that means it is time to roll out my ten predictions for the new year. As I did last year, I will start with number 10 and work our way up to number 1 over the last month of 2018. Enjoy!
Prediction #4 – Amazon’s Stock Roars Back To Life In 2019
Amazon shares have fallen into a bear market in 2018, but with the Fed on hold, interest rate and the dollar falling, and oil rising, the stock markets risk appetite comes back in a big way in 2019. That means Amazon may increase 25%, leading the market higher in 2019.
Analysts are forecasting monster revenue and earnings growth for Amazon and investors will once again begin to pay up for that growth rate.
Currently, analysts are forecasting revenue growth of 21% in 2019 to $280.8 billion and earnings growth of 36% to $26.61 per share. Amazon will continue to dominate the e-commerce landscape, while Amazon Web Service continues to be the leading cloud provider helping to bolster Amazon’s rapidly growing earnings. Meanwhile, Amazon’s ad unit will begin to start becoming a major contributor.
Sales Growth…
Amazon’s valuation is now at its lowest valuation in a year, with its price to sales multiple coming down to 2.7 times 2019 revenue estimates. But the good news is that analysts see revenue growing an extra 18% in 2020 to $332 billion and that means by the middle of 2019 investors will begin to value on its 2020 forwards sales, which are at only 2.2 times estimates. Should that multiple increase to 2.7 times 2020 revenue estimates the stock could rise 24% and its market cap back to roughly $900 billion.
…To Earnings Growth
With earnings surging investors will begin to re-value Amazon’s stock from a forward sales story to an earnings growth story and the focus will slowly shift to Amazon’s PE multiple, which is now 38 times 2020 estimates of $39.10 per share. It sounds astronomical, but consider analysts see earnings growing 47% in 2020, and that means the stock trades with a growth adjusted PEG ratio of 0.8. Should the PE match the 2020 growth, Amazon’s shares could climb to back to roughly $1,850, an increase of 25% from its current price of around $1478.
AMZN Annual Revenue Estimates data by YCharts
On All-Cylinders
If Amazon fires on all-cylinder and can deliver meaningful upside to these revenue and earnings estimates it seems likely share return to the all-times and its market cap once again reaches $1 trillion.
It makes Amazon our prediction #4 for 2019.
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Charts used with the permission of Bloomberg Finance L.P. This report contains independent commentary to be used for informational and educational purposes only. Michael Kramer is a member and investment adviser representative with Mott Capital Management. Mr. Kramer is not affiliated with this company and does not serve on the board of any related company that issued this stock. All opinions and analyses presented by Michael Kramer in this analysis or market report are solely Michael Kramer’s views. Readers should not treat any opinion, viewpoint, or prediction expressed by Michael Kramer as a specific solicitation or recommendation to buy or sell a particular security or follow a particular strategy. Michael Kramer’s analyses are based upon information and independent research that he considers reliable, but neither Michael Kramer nor Mott Capital Management guarantees its completeness or accuracy, and it should not be relied upon as such. Michael Kramer is not under any obligation to update or correct any information presented in his analyses. Mr. Kramer’s statements, guidance, and opinions are subject to change without notice. Past performance is not indicative of future results. Neither Michael Kramer nor Mott Capital Management guarantees any specific outcome or profit. You should be aware of the real risk of loss in following any strategy or investment commentary presented in this analysis. Strategies or investments discussed may fluctuate in price or value. Investments or strategies mentioned in this analysis may not be suitable for you. This material does not consider your particular investment objectives, financial situation, or needs and is not intended as a recommendation appropriate for you. You must make an independent decision regarding investments or strategies in this analysis. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Before acting on information in this analysis, you should consider whether it is suitable for your circumstances and strongly consider seeking advice from your own financial or investment adviser to determine the suitability of any investment.
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