Goldman Sachs Group Inc (NYSE:GS) still believes that Amazon.com, Inc. (NASDAQ:AMZN) is still attractive, and thus investors should consider buying the firm’s stock.
Goldman Sachs believes that the shares of the ecommerce giant are still at an affordable and attractive price even after the fact that the shares have gone up significantly since the financial crisis. Amazon is currently in the list of firms that Goldman recently released which it claims that they are the best for investing in currently.
Jessica Binder Graham is the research analyst from Goldman, who compiled the list. Goldman Sachs has also included Amazon’s stock in the list of stocks known as the conviction list. The stocks in the conviction list are expected to be the top performers. Unfortunately, Amazon’s shares have dropped by about 12% this year, but analysts are optimistic that things will look up.
Graham analyzed the forward multiples of the stocks currently from 2007 to the present to identify the stocks that have been performing below their cyclical averages. She identified that most of the companies she analyzed have been trading higher than their usual trading during a bull market or economic recovery. Graham’s analysis also indicates that Amazon’s shares have a cheap appearance. The stocks are 17.5 times more than the firm’s income before tax, amortization, interest and depreciation compared to an average of 24 times below the average price.
Amazon also had the lowest discount based on percentages among the 14 firms that were on Graham’s list. She also believes that Amazon stocks might continue to improve even in harsh economic times. Graham stated that there is over-earning in roughly 70% of the market, and consensus estimates indicate that 35% of the firms will reach their peak margins this year. Amazon has a low multiple coupled with robust revenue growth, and that is why it is able to tear easily through rising costs.
Mark Mahaney, an analyst from RBC Capital Markets has given Amazon stock a target price of $715 per share. He believes that the company’s margins will improve as it scales up.