With Amazon (NASDAQ:AMZN) rapidly cutting its costs, poised to benefit from a rejuvenation of cloud spending, and well-positioned to obtain a needle-moving boost from its new healthcare initiatives, AMZN stock is poised to climb at least 50% over the next year.
And, as you’ll see, one well-regarded stock analyst agrees with my price target on the shares.
Cost-Cutting Initiatives
Amazon has laid off over 27,000 of its employees and postponed construction on its “second headquarters in Virginia.”
Also importantly, Amazon is reportedly looking at following in the footsteps of several of its big-tech peers by meaningfully reducing the shares of AMZN stock that it provides to its employees. As Seeking Alpha contributor Tradvestor asserted recently, the move should be positive for Amazon’s stock price.
A Cloud Comeback and Disrupting Healthcare
The growth of companies’ spending on transitioning to the cloud has slowed in recent months amid recession fears. However, as I’ve pointed out in past columns, citing experts like Ed Yardeni and Ken Fisher, a recession is unlikely to materialize.
As a result, companies’ spending on the cloud transition will probably reaccelerate in the coming months, boosting Amazon’s huge cloud business and lifting AMZN stock.
On the healthcare front, Amazon has acquired One Medical, which provides telehealth and operates in-person clinics. Additionally, AMZN has launched Amazon Clinic, which sells prescription drugs at relatively cheap rates.
I believe that by working together, these two businesses can disrupt America’s huge healthcare market. Specifically, One Medical, which is currently providing unlimited telehealth visits for an annual fee of just $144, will grab a huge share of the telehealth and in-person treatment markets by reeling consumers in with the low fee and Amazon’s tremendous marketing reach.
One Medical will then refer its patients to Amazon Clinic, which will become very profitable, despite its low prices, as its volumes jump..
Showing that the prescription drug market is ripe for disruption, Mark Cuban’s company, CostPlus Drug, recently convinced Johnson & Johnson (NYSE:JNJ) to sell it a “blockbuster” diabetes drug, bypassing the Pharmacy Benefit Managers and pharmacies, “middlemen” that contribute significantly to the extremely high price of prescription drugs in the U.S.
If Cuban can convince pharmaceutical companies to provide his firm with drugs directly, then Amazon Clinic can certainly do the same. As a result, Amazon will be able to charge much lower prices for drugs than the pharmacies, all of which utilize PBMs and have high overhead costs. That, in turn, will allow Amazon to make a great deal of money with Amazon Clinic.
As it becomes clear in the next year that Amazon is indeed on its way to becoming a major player in the healthcare space, the price-earnings multiple of AMZN stock should climb significantly.
One Analyst Has a $155 Price Target on AMZN Stock
Mark Mahaney, a well-known and well-respected analyst at investment bank Evercore ISI, recently trimmed his price target on AMZN stock to $155 from $160, indicating that he expects the shares to be about 50% higher in a year. That’s in line with my target.
Among the positive catalysts cited by Mahaney are margin gains in the first two quarters of this year by Amazon’s retail unit and high advertising revenue. Additionally, like me, the analyst thinks that the growth of the company’s cloud unit will be impressive. He kept a “buy” rating on the shares.
The Bottom Line on AMZN Stock
Amazon’s cloud and retail units are poised to improve, while its advertising unit should grow rapidly going forward. What’s more, AMZN stock should be boosted within a year as the Street realizes that the company is likely to make needle-moving profits from One Medical and Amazon Clinic.
On the date of publication, Larry Ramer did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.