Amazon’s (AMZN) cloud unit Amazon Web Services (AWS) is strengthening its messaging capabilities. The unit has confirmed the acquisition of Wickr, a company that develops secure end-to-end encrypted communication technology.
With the acquisition, AWS users will gain access to advanced security features not in use in traditional messaging and communication services. The technology should be of great use to security-conscious businesses and government agencies, given the encryption in use.
Currently, the public sector uses Wickr offerings to securely communicate with office-based employees and provide a tactical edge on encrypted communications. (See Amazon stock chart on TipRanks)
"Enterprise customers use Wickr to keep communications between employees and business partners private, while remaining compliant with regulatory requirements," AWS in a press release.
Wickr's addition to the Amazon cloud offering could not have come at a better time. Currently, there is demand for secure communication solutions given the acceleration to hybrid work environments. Enterprise and government agencies are increasingly turning to offerings that can protect their communications across many remote locations.
Recently Jefferies analyst Brent Thill has reiterated a Buy rating on Amazon with a $4,200 price target implying 23.48% upside potential to current levels. According to the analyst, increased logistics investments adequately position the e-commerce giant for expanded same-day delivery services.
Last year, Amazon increased its global logistics network by 50% to 2.1 million square feet. The company plans to expand its U.S. capacity by 90 million square feet and international capacity by 25 million square feet.
Thill stated, "We believe AMZN's expanded capabilities position them to announce expanded same-day delivery offerings, supported by a recent focus on building a network of ~550 delivery stations by year-end, which generally focus on expedited delivery."
Consensus among analysts is a Strong Buy based on 33 unanimous Buys. The average Amazon analyst price target of $4,281.25 implies 25.87% upside potential to current levels.
AMZN scores a "Perfect 10" on TipRanks' Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.
Related News:
Weekly Market Review: Ending the Quarter on a Positive Note
High Tide Acquires Daily High Club
RBC Direct Investing Launches Free, Customizable Trading Dashboard
Warren Buffett is well-known for his value-focused approach to picking stocks. Accordingly, when the Oracle of Omaha invests in a company like Snowflake (SNOW), investors take notice.
After all, high-flying technology stocks are not Mr. Buffett’s forte. Granted, this purchase was likely made by one of Warren Buffett’s investment managers on his team (who have an excellent track record as well). However, to get the stamp of approval for Mr. Buffett, the pitch would have to be strong.
Indeed, those interested in Snowflake certainly have reason to be excited. Let’s take a look at what Snowflake does, and why world-class investors like Warren Buffett are jumping aboard. (See Snowflake stock chart on TipRanks)
Why SNOW Stock Is On the Move
Snowflake’s business model as a cloud-based data platform puts this company in the cross-hairs of hyper-growth investors. Indeed, cloud computing is the place where many investors want to be right now. As a growing competitor to other major players in the cloud space such as Amazon (AMZN) and Microsoft (MSFT), the potential upside of this stock is huge.
Accordingly, it’s no surprise that Snowflake has outperformed since its September 2020 IPO. The company’s reference price of $120 per share was quickly eclipsed, with shares more than doubling on its debut in the market. In fact, the lowest price SNOW stock has traded at, since its IPO, was just under $185 in May. Since then, shares have quickly climbed back to close to the $250 level, at the time of writing.
Indeed, as a cloud computing player providing an ecosystem for customers to consolidate data and generate meaningful business insights, Snowflake is a platform that’s generating a lot of attention. The growth trajectory with this stock is impressive, and investors appear to like the underlying business model of this company.
Given the fact that Snowflake is not yet profitable, investors like Warren Buffett are placing a lot of value on the future earnings this company can generate. Indeed, this is an unusual pick for such a conservative value investor. However, it’s clear Mr. Buffett sees things differently than the average investor – that’s why he is so successful.
Financial Results Stellar
While Snowflake isn’t yet profitable, the company is growing fast. Indeed, Snowflake reported revenue growth of 110% year-over-year in its most recent quarter. Product sales are expected to double, and the company’s cash flow is actually positive, at around $20 million.
For an early stage company like this, these numbers are very encouraging. Indeed, triple-digit growth is hard to find these days. For companies like Snowflake in the data-driven decision making business, as well as the cloud computing business, there’s a lot to like about this growth trajectory being sustainable. Analysts remain bullish on Snowflake’s prospects, and for good reason. That is despite a price-to-sales ratio which currently stands at more than 102.
What Analysts Are Saying About SNOW Stock
According to TipRanks’ analyst rating consensus, SNOW stock comes in as a Moderate Buy. Out of 20 analyst ratings, there are 11 Buy recommendations, and 9 Hold recommendations.
As for price targets, the average Snowflake analyst price target is $279.33. Analyst price targets range from a low of $240.00 per share to a high of $320.00 per share.
Bottom Line
Snowflake’s valuation is high, and some serious concerns around the potential for inflation and rising interest rates to eat into the valuations of hyper-growth stocks are likely to persist.
However, investors in Snowflake are betting the company’s growth rate will continue, allowing the company to grow into this valuation.
Buffett has stated he regrets missing out on the great rallies in certain stocks like Amazon. It appears he’s not going to do that again, and Snowflake is one of his top ideas.
For those looking to rip a page out of Warren Buffett’s book, this is a great stock to consider today.
Disclosure: Chris MacDonald held no position in any of the stocks mentioned in this article at the time of publication.
Disclaimer: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities.
Amazon’s (AMZN) Prime Day event took place earlier than usual this year. Although the company hasn’t released any revenue figures so far, going by the post-event blurb, Truist analyst Youssef Squali thinks the noises made by Amazon imply it was an unqualified success.
“Despite moving the event from October to June this year for the 20 participating countries (up from 19 in 2020), all indications seem to be that Prime Day was a record sales period again for the company, with more than 250M items purchased worldwide,” the 5-star analyst said.
If the Prime Day press release is anything to go by, it looks like the ecommerce giant is paying more attention to SMBs (small and medium-sized businesses). Amazon shone a light on the $1.9 billion spent on small business products, with the figure amounting to a 100% year-over-year increase. Consumers were well incentivized to spend on the segment; In the run up to the event, Amazon once again ran a "Spend $10 Get $10" promotional campaign, which in return for supporting small businesses, customers received cash back.
However, Squali thinks there was an ulterior motive to the SMB push.
“We view this as a calculated strategy given the recent regulatory pressure on Amazon from the FTC, which is investigating the competitive dynamics of Amazon's marketplace business, and treatment of smaller sellers on the platform,” the analyst opined.
Amazon also believes that in comparison to previous years, consumers saved more than ever this Prime Day. No numbers are out yet, but last year, member savings were $1.4 billion. Among the big categories that got a shout-out were tools, beauty, nutrition, baby care, electronics, apparel, and household products. Many of Amazon’s hardware products - Fire TV Stick 4K, Fire HD 10 Tablet, Alexa Voice Remote and a plethora of 3P products making use of Alexa - were on discount and sold by the bucketload too.
“Given that Alexa is a core part of Amazon's strategy of creating a deeper and stickier relationship with consumers,” Squali wrapped up, “We believe the continuation of this trend pays dividends over a long period.”
So, good news for Amazon and Prime customers, but what does it all mean for investors? Squali reiterates a Buy rating for AMZN shares and backs it up with a $4,000 price target. This target suggests the stock will be changing hands for a 17% premium a year from now. (To watch Squali’s track record, click here)
Amazon retains the Street’s full support. All 33 reviews are to Buy, which makes the analyst consensus on this stock a Strong Buy. The projection is for 12-month gains of 26%, given the average price target clocks in at $4,281.25. (See Amazon stock analysis on TipRanks)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.