Amazon's (AMZN, Financial) stock surged significantly, reaching an intraday peak with a nearly 3.3% increase, which pushed the Nasdaq 100 Index to a new historic high. Analysts indicate that despite the record highs, Amazon's stock remains undervalued.
The stock rose to $206.08, marking its highest level since July and later adjusted to a 2% increase. Since its low in August, Amazon's stock has climbed over 25%, boasting a year-to-date increase of 32%, whereas the Nasdaq 100 Index rose 23%. Amazon's standout performance comes amid a general post-election market rally.
Media reports attribute Amazon's recent strength to a robust quarterly earnings report, especially noting the significant growth momentum in its Amazon Web Services (AWS) cloud division, which is expected to benefit from long-term AI-related trends. Additionally, Amazon has expressed positive sales forecasts for the holiday season.
Mike Bailey, Director of Research at FBB Capital Partners, commended Amazon's overall excellent performance, highlighting its operations in cloud business, e-commerce, and advertising. Despite skepticism, these divisions are functioning well, contributing substantial value. The company's focus on cost and profitability makes it an attractive investment despite its high stock price. Amazon, noted for exceeding expectations and rapid growth, is seen as undervalued, making it a prime candidate for continued investment.
Improved profitability has also alleviated concerns over Amazon's valuation. Its price-to-earnings ratio stands at 29, higher than the Nasdaq 100 average but considerably below its decade-long average of over 53. Currently, Amazon remains a favored choice on Wall Street, with approximately 94% of analysts recommending its purchase. The stock's current price is about 15% below the average target price set by analysts, suggesting potential for further growth within the next 12 months.
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