Amazon's Q2 earnings missed its sales estimates. Tom Williams/Getty Images
JPMorgan believes that Amazon stock could soon reverse its recent underperformance relative the S&P 500's over the past year.
The bank reiterated its Overweight rating, and set a $4,100 price target to Amazon. This could give the bank a potential upside by 29% over Monday's close.
These are the four catalysts that could push Amazon shares higher in the coming year.
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Investors have been disappointed by Amazon stock over the past year. But JPMorgan stated in a Tuesday note that this trend could change if four key catalysts are implemented.
The bank reiterated its overweight rating for Amazon stock and stated that the stock could rise to $4,100 in the next year. This represents potential upside of 29% compared to Monday's close.
This would turn around Amazon's stock market, which has returned only 4% in the past year compared to a return 29% for S&P 500 over that same period.
According to the note, the stock has to clear a few hurdles with investors before the uptrend can be resumed.
These obstacles include a decline in year-end revenue due to difficult year-over year comparables and a wider e-commerce slowdown.
JPMorgan believes that despite the uncertainty and near-term concerns surrounding Amazon, "there is still an important secular shift towards ecommerce ahead" and that Amazon has a strong track record of investing in growth opportunities.
These are the four catalysts JPMorgan identified as being able to help Amazon's share price performance jumpstart.
"Current caution is working its way through stock and people who want to own Amazon into holidays." "Moving closer towards the last quarter COVID comps in 2022." "Further revisions to the 2022 profit estimates would help lower bar and possibly create more clearing events." "A possible Prime price rise in 2022."
The bank noted that Amazon trades at below 15x its below-2023 EBITDA estimates. It also derived its $4,000.22 price target from a sum of the parts model, which values Amazon Web Services at almost $800 billion.
JPMorgan concluded that "we believe the second-half of 2021 dislocation [in Amazon Shares] creates an compelling opportunity over time."
