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Why Amazon Stock Bounced Higher Today

By Rich Smith – Oct 5, 2021 at 2:31PM

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Two Wall Street analysts offer two reasons to buy the stock.

What happened

After suffering a bad case of the Mondays yesterday (like just about every tech stock on the planet), shares of Amazon (AMZN -1.44%) are bouncing right back on Tuesday, and were up a solid 2% as of 1:30 p.m. EDT.

You can thank Wall Street for that.

Long green arrow inches up at the end

Image source: Getty Images.

So what reports that investment bank Piper Sandler's (NYSE: PIPR) just-completed biannual "Taking Stock With Teens" survey found that Amazon remains the most popular and widely used retailer among teens, with 52% of youths surveyed saying they used it. This is important, Piper Sandler says, because it shows Amazon is still getting customers while they're young, so as the teen cohort ages into adulthood, it will be likely to subscribe to Amazon Prime (as adult Amazon users tend to do). This, in turn, "should serve as a powerful tailwind [for Amazon's profits] for many years to come," the bank says.

Now what

You wouldn't know this tailwind is there, to judge from Amazon's stock price. Shares are flat, and even down a small fraction of a percent, since the year began. But according to a second analyst, the J.P. Morgan division of JPMorgan Chase (NYSE: JPM), this price weakness in Amazon stock creates a "compelling opportunity" to buy the shares.

Investors might be worried that Amazon isn't growing as fast this year as it was in the depths of the pandemic, when much of the country was quarantined and locked down with nothing much to do but shop on the internet. Nevertheless, J.P. Morgan argues that multiple months of forced training in how to shop online has created a "significant secular shift" in American shopping patterns.

Amazon might not grow as fast as it did in 2020, but it will certainly grow. In fact, most analysts forecast 30% average annual earnings growth over the next five years.

Whether that's fast enough to justify a 60 P/E on the stock is the only real question remaining.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Rich Smith has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon. The Motley Fool recommends the following options: long January 2022 $1,920 calls on Amazon and short January 2022 $1,940 calls on Amazon. The Motley Fool has a disclosure policy.

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