E-commerce giant Amazon (NASDAQ:AMZN) is the most underappreciated of the megacap technology stocks. But it’s not likely to stay that way for long.
While Amazon stock is up 24% this year and outpacing the broader market, the company’s share price has been rangebound since the end of the first quarter, trading between $180 and $185 a share.
The stock made a run at $190 in early May, but quickly pulled back. The result is that many other Magnificent 7 megacap technology stocks have run laps around AMZN stock. Meta Platforms (NASDAQ:META) stock is up 45% on the year, while Nvidia (NASDAQ:NVDA) stock has gained 172%.
The good news is that Amazon stock is not likely to trade sideways for much longer, with a breakout and run toward $200 a share likely in the near-term.
Analyst Outlook
Despite treading water since the start of April, analysts remain extremely bullish on Amazon stock. Analysts are arguably more bullish on Amazon than any of the other Magnificent 7 stocks.
Currently, all 42 analysts offering a price target on Amazon rate it a “buy.” The consensus view is that the stock is a “strong buy.” There are no “hold” or “sell” ratings on AMZN stock. Even more impressive are the price targets on the shares.
The median price target on Amazon stock is $221.48, which is 20% higher than where the shares currently trade. The lowest of the 42 price targets on the stock is $200, which implies 8% upside from current levels.
Clearly, Wall Street sees Amazon underperforming at current levels, but like the near-term setup for the stock, especially heading into the company’s second quarter earnings report that’s scheduled for August 1.
A Possible Dividend?
Amazon’s last print was very strong and contained a lot of encouraging data points. In particular, advertising sales surged 24% from a year ago and grew faster than either retail sales or cloud computing.
Additionally, Amazon Web Services, the company’s dominant cloud computing unit, recorded $25 billion of revenue, beating estimates of $24.5 billion. AWS now accounts for more than 60% of the company’s operating profit.
Despite beating Wall Street estimates on the top and bottom lines, Amazon stock has stalled since the company’s first-quarter financial results were made public. The reasons are twofold.
First, management issued conservative guidance, saying they expect revenue in the current second quarter to come in at $144 billion to $149 billion, implying growth of 7% to 11%. The revenue guidance fell short of forecasts of 12% growth to $150.1 billion.
Second, Amazon declined to declare its first dividend payment. Leading up to the print, there had been speculation that the company would begin paying shareholders a quarterly distribution.
Amazon and Tesla (NASDAQ:TSLA) are the only companies in the Magnificent 7 group of stocks that don’t pay a dividend. However, there’s still time and with Amazon sitting on a cash pile of $73.9 billion, it can pay a dividend when it wants.
Buy Amazon Stock
Now is a great time to take a position in Amazon stock. Investors who get in now are likely to benefit when the share price takes it next leg higher.
Analysts remain extremely bullish on the company and its prospects, and see near-term gains ahead. Going forward, Amazon should continue to benefit from growth in its core e-commerce business, as well as areas such as cloud-computing and streaming.
Dividend or no dividend, Amazon stock is a buy.
On the date of publication, Joel Baglole held a long position in NVDA. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.