Nasdaq AMZN Amazon

There's no question that Target's (NYSE: TGT) second-quarter results left a lot to be desired.

For Immediate ReleaseChicago, IL – August 19, 2022 – Zacks Value Investor is a podcast hosted weekly by Zacks Stock Strategist Tracey Ryniec. Every week, Tracey will be joined by guests to discuss the hottest investing topics in stocks, bonds and ETFs and how it impacts y

Amazon’s (AMZN) stock performance depends in part on how the company positions itself for the future. The Jeff Bezos-founded company is leaning more on videos and social media features to fuel growth in its flagship retail business. In that strategy, Amazon has TikTok and Netflix (NFLX) on its target.

Although cloud computing has become Amazon’s most profitable business, the retail division remains its largest operation. In Q2 2022, for instance, the cloud business contributed about 173% of Amazon’s operating profit while the retail unit accounted for about 84% of the total revenue. 

Apart from item sales, Amazon’s retail division also houses the company’s advertising and subscription services. Therefore, an increase in shopper visits to the retail platform can also generate more advertising and subscription sales for Amazon.

Amazon Working on TikTok-Like Feature to Draw More Shoppers

TikTok’s video-sharing feature has become a hit with young people. From Meta Platforms (META) to Alphabet (GOOGL), various technology companies are trying to copy TikTok features in an effort to replicate its success. 

Amazon has joined the race to offer TikTok-style features on its platform. The company is testing a feature that shows users photo and video feeds about products sold on its retail platform, according to a Wall Street Journal (WSJ) report citing people familiar with the matter. 

Shoppers can share the streams with others or purchase the featured products. Amazon’s TikTok-like feature, dubbed “Inspire”, is initially testing internally with staff. If launched to the public, the feature may help Amazon boost engagement with its shoppers. That may in turn lift the company’s retail sales.

Amazon Considering Poaching Netflix’s Star Film Executive

Amazon is looking for someone to lead its expanding entertainment unit, according to a separate WSJ report. The company has considered Netflix’s studio head Scott Stuber for the role. Stuber is credited for many of Netflix’s hit films. 

At Netflix, a recent string of subscriber losses has sparked a rush to cut costs, which have resulted in job cuts. However, Amazon is still showing strong appetite for more spending as it works to draw more subscribers to its video offering. 

While people can purchase a standalone Amazon Prime video plan, Amazon primarily offers the video as part of its Prime membership program. The program has left Amazon build a loyal customer base that continues to fuel its retail business. In the latest update, Amazon revealed having 200 million Prime members globally.

Apart from paying the annual or monthly subscription fee, Prime members also shop on Amazon more often. Moreover, Prime members usually spend significantly more on Amazon shopping in a year than the regular customers.

Amazon’s attempt to poach a star Netflix film executive also highlights the intensifying competition among video streaming providers. Offering great content helped Netflix grow rapidly and rivals are keen to replicate that strategy. In addition to Amazon, Walt Disney (DIS) and Comcast (CMCSA) are the other major companies waging a streaming war with the market leader Netflix.

Is Amazon Stock Rated a Buy?

Although Amazon’s stock has gained almost 33% in the past three months, it is still about 24% below its 52-week peak of $188. Wall Street remains bullish on the stock.

According to TipRanks’ analyst rating consensus, AMZN stock is a Strong Buy based on 39 Buys and one Hold. The average Amazon stock price prediction of $176.04 implies 24% upside potential.

Amazon stock is a favorite among retail investors. TipRanks’ Stock Investors tool shows that investor sentiment is currently Very Positive on Amazon. In the past 30 days, 13.2% of the top-performing portfolios tracked by TipRanks increased their exposure to AMZN stock.

Final Thoughts

Facebook and Google gained from offering TikTok-like features and Amazon might see benefits from doing the same. The efforts that Amazon is making have the potential to drive significant growth in its retail business.

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In this video, I will be comparing Amazon (NASDAQ: AMZN) to Walmart (NYSE: WMT) to evaluate which one is the more investable option right now.

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Amazon (AMZN) stock has begun to run out of steam in the $140 range, just weeks following its sensational second quarter. Despite all the exciting new developments, including the acquisition of One Medical and iRobot (IRBT) and the development of a TikTok-like social feature, the stock remains down around 25% off its high of around $189 per share. Indeed, Amazon stock appears to be an absolute steal at these levels. The recent M&A spree gives the e-commerce darling a means to expand into new industries.

Simply put, Amazon has not wasted the recent slip in the broader markets. Even if there is an economic contraction on the horizon, Amazon could gain considerable ground over new market rivals it's looking to pinch.

I remain bullish on shares of Amazon at this juncture. Even if the FAANG trade begins to fade, Amazon is still one of the most disruptive forces in the market today. The firm's disruptive capabilities helped it power past prior recessions. Looking ahead, the $1.45 trillion company may be in for more of the same as it looks to fuel its next leg higher — one that may very well dwarf the recent slide in shares.

Amazon Scoops Up Roomba-Maker iRobot and One Medical

Amazon has been busy wheeling and dealing of late. While the firm has always been known to have a hand in many pies, recent deals seem to shine a bright light on where the disruptive innovator could be headed next. The acquisition of robotics firm iRobot and One Medical for $1.7 billion and $3.9 billion, respectively, did not come cheap but could help kickstart the firm's lateral movement into the consumer robotics and healthcare industries.

With momentum in the consumer robotics and healthcare divisions, Amazon may finally have the means to build its "fourth pillar" and diversify away from AWS (Amazon Web Services), e-commerce, and Prime services.

The prior Whole Foods acquisition has not yet taken the world by storm, but Amazon still nabbed an enticing banner that will be ready for the firm once it deems it's time to double down on its brick-and-mortar push. For now, Amazon seems content with picking and choosing areas to disrupt.

Amazon's Health Push Could Reignite Growth 

Amazon's health ambitions are no mystery to investors. From the PillPack acquisition nearly four years ago to Jeff Bezos' failed healthcare venture with Warren Buffett and Jamie Dimon, it's always been clear that Amazon saw itself as playing a significant role in the massive industry.

The inefficient healthcare industry also seems ripe for disruption, and the One Medical acquisition appears to create an immediate foundation for Amazon to work its magic.

Undoubtedly, telehealth and other intriguing technologies helped Teledoc (TDOC) skyrocket to orbit in the early innings of the COVID-19 pandemic. Arguably, Teledoc found itself in the right place at the right time. Though the telehealth bubble had its chance to boom and bust, Amazon now seems more than willing to get into the space while most other investors back out.

As Amazon looks to incorporate its own technologies (think telemedicine and convenient drug delivery), I think the sky is the limit for Amazon and its new health endeavors.

Breaking into the field will not be easy, but with such powerful network effects at its side, I do think Amazon's health pursuit is one that has major upside with minimal downside risk. Amazon's health rivals are on notice; it's time to innovate or be left behind, like the many retailers that Amazon crushed over the years.

iRobot Deal Makes Amazon a Top Contender in Home Automation

Compared to the One Medical deal, Amazon's iRobot acquisition seems less risky but with less in the way of longer-term rewards. Amazon's slow and steady push into smart home devices has been ongoing for many years. With the addition of Roomba's owner in the arsenal, Amazon now looks to have a compelling lineup and a new item to pick up come the next Prime Day sale.

The deal doesn't just stop at the automated vacuum cleaner, though. Amazon will be bringing on new talent that can help its other consumer robots pick up traction. Amazon's Astro is an intriguing device that could be made so much better by the folks over at iRobot.

As Amazon continues to push into the smart homes of tomorrow, investors and analysts should not discount the added innovative capabilities of the iRobot deal. Home automation is a major growth market that a lot of firms are fighting for. With Roomba in the lineup, Amazon looks to be a top contender poised to expand its lead.

Is Amazon Stock Expected to Rise?

Turning to Wall Street, AMZN stock comes in as a Strong Buy. Out of 40 analyst ratings, there are 39 Buys and one Hold.

The average Amazon price forecast is $176.04, implying upside potential of 21.6%. Analyst price targets range from a low of $118.00 per share to a high of $270.00 per share.

Conclusion: AMZN is Too Cheap to Ignore, Given Growth Prospects

Amazon has been an active buyer of this market dip. One Medical and iRobot are in great hands with Amazon as it looks to increase its disruptive capabilities in each new market.

Amazon stock seems way too cheap to ignore at just 3x sales, given the growth prospects of its fourth (and perhaps fifth) pillar. For now, the healthcare push shows more promise. However, the iRobot deal makes Amazon one of the best automation plays in the market today.

Disclosure

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In this piece, we'll use TipRanks' Comparison Tool to look at three FAANG stocks — AAPL, GOOGL, AMZN — that Wall Street is pounding the table on, with "Strong Buy" ratings and price targets that still imply solid gains from current levels.

FAANG stocks have been in rally mode ever since the broader stock market formed a bottom in June. Many firms within the exclusive cohort have been viewed as rather defensive amid the recent barrage of volatility. While the powerful tech behemoths aren't immune to the impact of a steep economic downturn, they seem better equipped to take further market share away from their competitors.

Undoubtedly, the FAANG group has found ways to adapt to difficult times. Though the coming recession could be the falling tide that lowers all boats across the S&P 500, my bet would be that the best-in-breed firms, like those within FAANG, will be the ones that better themselves most as job cuts and cutbacks on investment become the new norm.

While I don't view FAANG as the market's "new defensives," I do think they're in great shape to continue acting resilient over the coming weeks and months. This market is beginning to show signs that it's okay with higher interest rates if it means pushing inflation off of its incredibly elevated peak.

Apple (AAPL)

Apple has been the hottest of the FAANG cohort of late, surging more than 33% off its June low. Undoubtedly, the iPhone maker is showing signs of taking share away from rivals. As the world slips into a recession, Apple seems well-equipped to offset macro headwinds as it continues moving into the turf of rivals, not just in smartphones but across other product categories and services.

Morgan Stanley (MS) analyst Erik Woodring recently noted that Apple has more stable products relative to competitors. He's right. With such a powerful ecosystem of many loyal users, Apple can raise prices in a big way without its customers putting up too much fuss. In an era of high inflation, Apple's top-tier pricing power is paying major dividends. Just ask Warren Buffett, who took another big bite out of AAPL stock in the second quarter.

For the second quarter, Apple saw demand shipments slip 9%. Still, global demand couldn't be more robust, with Apple's global phone share rising to 17% in Q2 from 14% over the same quarter a year prior.

Apple continues to flex its muscles, and I find it hard to believe a mild recession will stop recent momentum in its tracks. Looking ahead to 2023, a recession may be in the cards. That said, the firm could be poised to unveil its mixed-reality headset.

Undoubtedly, it's been such a long time since Apple delivered such a shocker at its keynote. Though the headset is no longer a surprise, given the rumor mill has been spinning for years now, I wouldn't at all be shocked to see shares rally as the design and additional details are released.

Indeed, Apple may have the keys to the metaverse, making it an exciting time to be a shareholder.

Like the Oracle of Omaha, Wall Street analysts just can't get enough of AAPL stock, which has 23 Buys, four Holds, and one Sell. The average Apple price target of $182.79 implies just 4.7% upside potential over the year ahead. Given the magnitude of the recent run, though, Apple stock seems overdue for some price target upgrades.

Alphabet (GOOG)(GOOGL)

Alphabet stock has enjoyed a much more muted bounce off June lows, now up around 16%. The company is fresh off a better-than-feared quarter that actually fell short of analyst expectations. For Q2 2022, Google's per-share earnings came in at $1.21, just shy of the average analyst estimate of $1.27.

Despite the rare bottom-line fumble, investors have been much more forgiving of the name. Google Cloud really flexed its muscles for the quarter. As the secular trend in the cloud continues, it's likely that Google's Cloud business can continue helping the stock weather any further macro storm. Sometimes secular trends are just far stronger than mild macro headwinds.

Alphabet's Q2 revenues came in just shy of $70 billion, up 12.6% year-over-year on a constant-currency basis. Advertising — a segment that's caused quite a bit of investor nail-biting in recent months — remained robust, up 11.6% year-over-year.

Though YouTube has hit a bump in the road, I still view it as head and shoulders above peers in the social space. Undoubtedly, the video platform remains a preferred entertainment option among many within the Generation Z (Zoomers) cohort.

As the worst of the recession sets in, we may see Alphabet's ad growth reaccelerate. For now, Alphabet remains one of the cheaper FAANG stocks at this juncture at 22.3 times trailing earnings.

Wall Street continues to praise Alphabet stock, with 32 analysts rating the name as a Buy while only two analysts rate it a Hold. Google's price forecast of $142.63 puts the upside potential comes in at 18.9%.

Amazon (AMZN)

Amazon is the e-commerce darling that blew away expectations in its second quarter. Undoubtedly, many investors and analysts may have underestimated the retail behemoth's staying power in the post-Bezos era. CEO Andy Jassy has proven a capable leader, and he's ready to propel the e-commerce darling to the next level.

As the consumer recession sets in, retail may be in for a slump. Still, Amazon has shown that AWS (Amazon Web Services) is the new star of the show, with AWS growth surging by 33%. As a cloud frontrunner, Amazon arguably has the most room to run as the secular trend in the cloud continues through the coming period of economic slowness.

Further, Amazon's forward-looking projects seem most exciting, as the company looks to increase its disruptive force amid rising interest rates. Higher rates have curbed reinvestment in growth among many cash-strapped small firms in the tech space. With such deep pockets and the ability to sustain steep losses across various forward-thinking business segments, Amazon is arguably one of the best growth stocks to own in this environment.

The firm's logistics and fulfillment push could bolster its payments business and help Amazon spread its wings of disruption further. Simply put, the FAANG behemoth is better-positioned than most to grow in a recession, mild or severe.

Wall Street still loves Amazon stock while it's off 22% from its highs, with 39 Buys and just one Hold. The expected upside for the year ahead comes in at 24%, as Amazon's price target is $176.04.

Conclusion - Wall Street is Most Bullish on AMZN Stock

FAANG stocks are magnificent companies that may be key to succeeding in a 2023 mild recession. Of the three stocks mentioned, Wall Street expects the greatest gains from Amazon stock over the next year.

Disclosure