Have Amazon shares peaked? Some industry experts think so
The Amazon share price has increased by more than 80% this year. Thanks to a record-breaking Black Friday, the company is set to pay out a £374 million Christmas bonus.
Black Friday 2020 is set to break all previous records and, in turn, give Amazon shares a boost. By that measure, business is booming. However, Scottish Mortgage (SMT) fund managers James Anderson and Tom Slater recently sold 2.1% of their holding in the company. The long-term investors made their move just days after Jeff Bezos cashed in one million of his own shares.
The company owners, Anderson and Slater, have ridden the Amazon share price wave for more than 16 years. Although their fund still has a 7.9% holding in the company, they believe significant long-term gains will be hard to come by in the future.
'Whilst we have huge respect for Amazon’s vision and ability to execute, its starting capitalisation of over $1.5 trillion makes the path to large future returns more challenging,' the fund managers said during a recent half-year report.
Scottish Mortgage implies Amazon share price has peaked
This isn’t the first time the pair have sold shares in Amazon. However, it is the first time they’ve done so on the basis that they may have levelled out. It’s true that Amazon shares have plateaued over the last eight weeks. After starting the year at $1,898, the Amazon share price peaked in September at $3,550.
The subsequent downswing has been far from severe - trading opened at $3,195 on 30 November. However, Anderson and Slater believe the potential for another significant spike is low. The data, however, suggests that eCommerce is stronger than ever. Live Adobe Analytics data predicts that consumer spending will reach record levels this year.
Tracking sales at 80 of the top 100 US retailers, Adobe’s forecast shows spending between Black Friday and Cyber Monday will reach $189 billion. That’s a 32% increase on the $142.2 billion spent in 2019. Prior to Black Friday, analysts at Truist estimated that 42 cents of every dollar spent would go to Amazon. That fact may have contributed to the five-day increase in Amazon shares. In the days prior to Black Friday, the Amazon share price jumped from $3,117 to $3,214.
Amazon share price could rise in a post-COVID world
NYU marketing professor Scott Galloway believes Amazon was 'invented for the pandemic'. In contrast to Anderson and Slater, he believes the company will go from strength to strength in a 'post-corona' world. The recent launch of Amazon Pharmacy certainly supports this hypothesis. Prime customers can now create 'secure' medical profiles and have medication delivered to their door as well as discounts on prescription drugs.
The company has always been one for diversification and now it’s tapped into the post-COVID health concerns of millions. What’s more, record spending over Thanksgiving suggests that online retail is far from passé. The Amazon share price may have hit an annual high in September, but that may have raised the baseline. Indeed, it will be interesting to see whether Scottish Mortgage made the right call or whether Galloway’s post-corona prediction comes to pass.
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