Is Amazon heading to a A$1.65 trillion valuation?


In a sign of the times analysts at U.S. investment bank Morgan Stanley this week reportedly claimed that online retailer and cloud services market leader Amazon Inc. could be worth an astonishing US$1.2 trillion (A$1.65 trillion) in the near future.

That would translate into a US$2,500 (A$3,440) per share price and put the stock potentially out of reach from junior investors just due to the nominal price (A$3,440) of owning a single share.

According to news reports, Morgan Stanley’s bullish price target is on the back of the widely held belief that Amazon’s cloud services (online data storage) business is set to crank overall profitability.

The analysts also believe Amazon’s advertising business will increase profitability, while it’s no secret the traditional online retail business also has potential to keep growing its top line at rapid rates via geographic expansion.

The arrival of Amazon’s online retail business in Australia has proven an anti-climax after being constantly hyped as a “game changer” by investment analysts and the business media through all of 2017.

However, the retail sales of many businesses thought to be most threatened by Amazon’s arrival, including JB Hi-Fi Limited (ASX: JBH) and footwear retailer Accent Group Ltd (ASX: AX1) continue to rise at healthy rates.

In reality the Australian retail sector faces bigger problems than Amazon, including soft wages growth, flat to falling house prices, and the arrival of other overseas discounters or online retailers. As such it’s a dangerous enough space to invest in without the Amazon threat.

Overnight, Amazon shares closed above US$2,000 for the first time and investors taking a long-term view could still do well buying into this textbook blue-chip of the internet age.

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Motley Fool writer Tom Richardson owns shares of Amazon and Accent Group. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Amazon. The Motley Fool Australia has recommended Amazon. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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