Long-time tech analyst Brent Thill has crunched the numbers on Amazon, and could make a strong case on the tech giant being 70% undervalued at current valuation levels.
Or looked at a different way, the company could someday have a market cap of $3 trillion as opposed to the $1.72 trillion it sports today.
"Our sum-of-the-parts analysis shows ~70% upside over the next three years [for Amazon], driven by Amazon Web Services and Advertising. This implies Amazon's market cap approaches $3.0 trillion by 2024 and this does not include potentially meaningful contributions from multi-billion dollar opportunities in health care, home security, smart-home devices, and entertainment. The company also has room for further expansion in areas such as apparel, B2B [business-to-business], and SaaS [software-as-a-service]," Thill wrote in a new research note.
Thill says his sum-of the parts analysis warrants a $5,700 stock price for Amazon. But he is quick to note his price target remains $4,000 with a Buy rating, despite the pathway to larger gains for the stock.
"Our sum-of-the-parts analysis is purely illustrative and does not reflect our official price target. We believe evaluating Amazon over a longer period (based on 2024 estimates) helps provide perspective in the face of near-term disruptions/volatility from the pandemic. We also see Amazon's discount to its sum-of-the-parts narrowing over time, making it a good indicator of long-term valuation. Note we are not attributing any value to Amazon health care initiative, which is addressing $350 billion in U.S. Rx spending and could help increase engagement/frequency among existing users while also helping attract additional Prime members," explains Thill.
Amazon shares rose slightly to $3,428 on Tuesday's session.
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