Amazon (AMZN) has certainly become Wall Street’s golden child after beating earnings last month, bringing much-needed relief to investors concerned about the industry after Apple and Twitter whiffed on earnings just days before.
In fact, investors are so bullish about Amazon that one analyst now expects the stock to reach $1,000 in 12 months—the first analyst to lift Amazon’s target price to quadruple digits.
While Wall Street has estimated an average 12-month target price of $809.28, Carlos Kirjner from Sanford Bernstein leapt ahead, hiking his target price 30% from $770—a figure that Amazon has yet to reach.
His argument is an interesting one. According to Kirjner, Amazon will grow so fast and profitable that it will soon have too much cash to invest back into the company—widening profit margins.
“We think Amazon’s businesses are now so large, fast-growing, and profitable that it is harder and harder for the company to find new areas of investment to keep up with the growth in gross profits,” he wrote. “Time is on the side of margin expansion.”
He noted that with time, products such as the fast growing Amazon Web Services and the company’s newer fulfillment centers will generate even more revenue, while cutting down on expenses.
Kirjner, now likely the most bullish Amazon analyst, also called Wall Street’s consensus target price “shockingly low” for the next two to three quarters. The next highest target price was set by J.P. Morgan’s Douglas Anmuth, at $915.
Kirjner’s target price bring’s the company’s market cap up to $471.8 billion, up from $333 billion as of Tuesday—which would seem conservative in comparison to the $3 trillion valuation that Chamath Palihapitiya, founder of hedge fund Social Capital, expects Amazon to eventually reach.
Shares of retail and internet giant Amazon jumped over 3% in trading Tuesday.
