Posted on March 18th, 2019
The shares of Amazon.com Inc. (AMZN) have been range bound for months. What may be most surprising is that Amazon’s stock is still 17% off its September highs, despite a broader market recovery. However, Amazon’s stock has increased more than 26% off its December 24, 2018 lows, despite the S&P 500’s climb of 20%; this is an indication of just how deeply Amazon’s stock has fallen over the past six months.
Investors were aggressively buying shares of Amazon during the fourth quarter, that is for sure. According to data from WhaleWisdom, the number of institutions buying shares of the e-commerce company increased by 1,216, versus 796 that were selling, a ratio of more than 1.5 to 1.
Moving Up The Heat Map
Even some of the most prominent hedge funds aggressively bought Amazon during the fourth quarter. The stock ranking on the WhaleWisdom Heat Map improved to 41 from 71 in the third quarter. Of the 150 hedge funds that WhaleWisdom tracks for the Heap Map, 42 of them have the stock as a top 10 holding. Additionally, 31 of the 150 were adding to their positions, while 27 were reducing their positions.
Buying The Stock
Overall, all hedge funds in aggregate were buying up the stock, with the number of total 13F shares held increasing by almost 8% to approximately 16.1 million shares. In total 163 funds either added to or initiated new positions. That is against only 134 funds that liquidated or reduced their shares.
One reason why investors likely jumped all over the stock as it plunged was due to the significant promise of growth in the future. Analysts’ consensus estimates project revenue to grow at a compounded annual growth rate (CAGR) of 17% through the year 2020 to almost $375 billion from $232.9 billion in 2018. Additionally, analysts estimate that earnings will grow even faster, at a CAGR of almost 42% to $57.36 per share in 2021 from $20.14 in 2018, nearly tripling.
Analysts See Big Upside
Analysts are also very bullish on the stock with an average price target of roughly $2,126.63, nearly 17% higher than the current price of around $1,700. Of the 46 analysts that cover Amazon, 98% of them rate it a buy or outperform. There is only one analyst that currently rates the stock a hold.
While the growth outlook for the company looks bright, the valuation for Amazon has been a source of contention among investors, with the shares trading at nearly 43 times 2020 earnings estimates of $39.48.
Despite still being well off its highs, if the current growth projections for Amazon remains, it is hard to deny the outlook for the company is spectacular. It is likely a good reason why investors were buying the stock hand over fist during the fourth quarter slide.