Why Amazon's Stock May Reach $3,000 by 2020

Amazon.com Inc. (AMZN) briefly became the second U.S. corporation to exceed $1 trillion in market value earlier this year. In the next two, it could reach nearly $1.5 trillion thanks to a handful of key growth markets, according to one team of bulls on Wall Street. (See also: Seven Reasons Why Amazon Should Split in Two: Citi.)

In a note to clients on Tuesday, Jefferies lifted its 12-month price target on shares of the e-commerce and cloud computing giant to $2,350 from $2,185, reflecting an over 21.5% upside from current levels, CNBC reports. Trading was down by about 0.2% on Wednesday morning. Valued at $1,971.26, Amazon's stock reflects a 68.6% return year-to-date (YTD), compared to the S&P 500's 9.2% gain over the same period. 

Trading at Material Discount to Peers

"In our view, many of [Amazon's] embedded growth opportunities are underappreciated," writes Jefferies analyst Brent Thill. Thill highlights Amazon's leading public cloud platform, Amazon Web Services (AWS), as the "de facto standard" in the industry, while its subscription-based Prime membership and "best-in-class fulfillment capabilities" continue to drive core retail revenues. Across Amazon's platforms, advertising is working to boost profitability and expand the Seattle-based retailer's total addressable market, Thill says. 

"AWS, advertising, and subscription are all growing ~ 2 times faster than the core and are more profitable. We estimate conservatively these businesses will be on a combined $115B+ run rate by 2021, just over a quarter of total revenue, but close to half of Amazon's value," says Thill, who rates Amazon at Buy.

Thill's two-year price forecast of $3,000 reflects an approximate 55% upside, reflecting longer-term opportunities in new markets like healthcare as Amazon expands far outside of its core e-commerce business. In light of all the "embedded growth opportunities and the optionality from new initiatives," Jefferies views Amazon as trading at a material discount to its peers on a growth-adjusted basis." Moving forward, the analyst expects multiples to expand. (For more, see also: 5 Reasons Amazon May Double to $2 Trillion.)