Amazon.com Inc (AMZN)

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Amazon will hit $3,000, says Piper Jaffray, making Buffett look smart
By: MarketWatch | May 24, 2019

Investors are getting a break from a string of bad news on the trade front, as some glass-half-full headlines trickle through, boosting global equities at the week's end.

But news that President Trump may ease up on Chinese tech giant Huawei (see buzz below) probably won’t salvage May, which is shaping up as the worst month for investors since the December rout. We’ll have a nice long weekend to chew over the damage that’s been done, but also get a much-needed break from it all, with Wall Street closed on Monday for Memorial Day weekend.

Our call of the day, from analysts at Piper Jaffray also gives us a holiday from the trade headlines, as it lays out a bullish case for a high-flying company which recently got a major thumbs up from billionaire investor Warren Buffett.

We’re talking about e-commerce giant Amazon AMZN, +0.74% whose shares have gotten a little wrecked this month as a consequence of the general equity pullback over the trade tensions. But it has still managed to claw back much of the ground lost from December.

At the heart of the call is Amazon’s valuation. Piper explains that there are two ways of calculating it, one using a traditional retail multiple and the other that places Amazon firmly in the tech category where projections are calculated using an e-commerce multiple. The difference is significant – to the tune of $500 billion because Piper says Amazon’s shares could be undervalued by around 65%, based on Thursday’s close of $1,815.48.

“We believe Amazon shares will reach $3,000 by sometime between mid-’21 and mid-’22 or within 24-36 months. Our confidence in this 65% move is based on what we believe to be relatively conservative growth and valuation assumptions...” said analysts Michael J. Olson and Yung Kim, who have an overweight rating on the stock and a current price target of $2,225.

Olson and Kim also think Amazon can get to this $3,000 level without making any other acquisitions or big business changes, though they say a spinoff of the group’s Amazon Web Services cloud platform would only help to highlight that its other segments aren’t being valued enough.

Last month, Amazon reported a record profit for the first quarter, but rattled some investors with a warning that operating profit for the second quarter will decline. Even so, it’s hard to find a Wall Street who doesn’t rate the company a buy.

If Piper Jaffray’s bullish Amazon call turns out to be right, that will be great news for the faithful investors out there who think Jeff Bezos’ company still has much to give, even after shares have soared 2,000% over 20 years. That means

But as well, that investing savant Buffett will once again look like the smartest guy in the room. The chairman of Berkshire Hathaway BRK.A, -0.06% BRK.B, -0.64% said earlier this month that the company had been buying shares of Amazon and he had been a fan of the company, and “an idiot for not buying” in the past.

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