A Wall Street analyst, Jordan Rohan of Stifel, has raised his price target on Amazon to $US400 a share.
This target hike comes in the wake of another explosive move upwards in Amazon’s stock price and another Amazon quarter that befuddled Wall Street. (Rohan was excited about Amazon’s quarter, saying it beat expectations. Other analysts say the quarter missed expectations. Regardless, the stock exploded to a new all-time high.)
Given that Amazon is now trading at $US360 a share, a price target of $US400 would not be notable except for the fact that this is the same famous price target another analyst put on the stock 15 years ago, way back in 1998.
That analyst was me.
Amazon’s stock has split several times since then, so today’s $US400 is not the same as the 1998 $US400. (The 1998 $US400 is equivalent to $US67 in today’s Amazon stock). Also, although Amazon’s stock briefly blew through my 1998 $US400 price target in 1999 and 2000, it then cratered and spent 7 years in the wilderness. So this is not a humblebrag.
One thing that is the same between the Amazon of today and the Amazon of 15 years ago, however, is that the stock is still violently controversial.
For the past 10 years, as Amazon has recovered from its dotcom-bust low, it seems that every week or two, there’s some new analyst on TV proclaiming that the stock’s valuation is “ridiculous” because Amazon “makes no money.” And that’s exactly the same thing that many very self-assured analysts said in the 1990s.
Which just goes to show you…
Making money isn’t everything.
From the beginning of its history as a public company, Amazon has been upfront and unapologetic about its intention to put its customers and long-term investments ahead of the short-term profit demands of Wall Street. This approach has been as successful as it is rare. Amazon is one of the few companies launched during the heyday of the Internet boom that has powered through the bust and gone on to make its euphoric late-1990s stock price look cheap. And that is despite ever dropping anything meaningful to the bottom line.
If more companies behaved the way Amazon does, reinvesting more of their earnings, putting customers and long-term value creation ahead of near-term profit, the U.S. economy would be much better off. Fewer companies would be making nearsighted decisions designed to boost the current year’s profits while under-investing in the long term. Fewer companies would be firing thousands of valuable employees just to meet random quarterly financial targets. And more Americans would be working and having more money to spend, thus boosting the rest of the economy (almost every dollar a company spends in this country becomes revenue, wages, and spending money for other companies and people).
For now, unfortunately, corporate America’s obsession with profit still carries the day.
But, hopefully, as Amazon’s stock blasts ever higher, and the company’s global franchise becomes ever stronger, other companies will begin to see the wisdom in Amazon’s approach. Creating value is more important than creating profit.
SEE ALSO: Create Value, Not Just Profit
Disclosure: I have owned Amazon’s stock since 1999, despite the fact that it is making less money than I thought it would. Amazon’s founder and CEO Jeff Bezos is also an investor in this company.
Disclosure: Jeff Bezos is an investor in Business Insider through his personal investment company Bezos Expeditions.
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