Is Amazon Stock a Buy Ahead of Prime Day? This Is What You Need to Know

Amazon’s (AMZN) Prime Day will kick off early this year, taking place at the start of the week, on June 21-22 (Monday and Tuesday), instead of in July (apart from Read More... The post Is Amazon Stock a Buy Ahead of Prime Day? This Is What You Need to Know appeared first on TipRanks Financial Blog.

Is Amazon Stock a Buy Ahead of Prime Day? This Is What You Need to Know

Amazon’s (AMZN) Prime Day will kick off early this year, taking place at the start of the week, on June 21-22 (Monday and Tuesday), instead of in July (apart from last year’s pandemic-dictated October event).

The shopping festivities will include over 2 million deals for the 200 million strong Prime subscribers across the globe. However, non-Prime members can also enjoy the Prime Day Show event streamed on Amazon Prime Video. This three-episode event remains available for 30 days with segments dedicated to Billie Eilish, H.E.R. and Kid Cudi. Making the most of Amazon’s interplay between ecommerce and media, to mark the event, Billie Eilish also launched merchandise exclusively on Amazon.

While millions across the globe are set to participate in the promotional shopping extravaganza, the event coincides with more scrutiny of Big Tech.

Last week, the House Judiciary Committee’s Antitrust Subcommittee drafted five bills intended to curtail the influence of Amazon and its fellow tech giants Alphabet, Facebook and Apple.

While segments of each bill could have consequences for all four companies, Monness’ Brain White believes “some bills appear more consequential than others.”

“In our view,” the 5-star analyst said, “The ‘Ending Platform Monopolies Act’ appears highly relevant to Amazon. The act is designed, ‘To Promote competition and economic opportunity in digital markets by eliminating the conflicts of interest that arise from dominant online platforms’ concurrent ownership or control of an online platform and certain other businesses.’ Also, the ‘Platform Competition and Opportunity Act’ and the ‘American Choice and Innovation Online Act’ appear pertinent to Amazon.”

How these will affect the company in the long-term is unknown, but for now, White believes Amazon stock’s middling performance of late is no reflection of its real-world strength. After the pandemic-driven “surging demand,” White believes the ecommerce leader is “uniquely positioned to exit this crisis as one of the biggest beneficiaries of accelerated digital transformation.”

Accordingly, White has a Buy rating on Amazon shares, backed by a $4,500 price target. Investors could be sitting on gains of 29%, should White’s thesis prove correct. (To watch White’s track record, )

White thinks Amazon stock is due to break out of the past few months’ range-bound display, and so do the rest of Wall Street’s analyst corps. The stock has a Strong Buy consensus rating based on a unanimous 32 Buys, while the $4,297.58 average price target indicates gains of 23% could be in store over the following months. (See Amazon stock analysis on TipRanks)

To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.

Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

The post Is Amazon Stock a Buy Ahead of Prime Day? This Is What You Need to Know appeared first on TipRanks Financial Blog.

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NIO: Great Business, But Valuation Is Sky-High

NIO Inc. (NIO) designs and manufactures high-tech electric vehicles in China. As a major player and innovator in connectivity, autonomous driving, and artificial intelligence technologies, it competes directly with Tesla Read More... The post NIO: Great Business, But Valuation Is Sky-High appeared first on TipRanks Financial Blog.

NIO: Great Business, But Valuation Is Sky-High

NIO Inc. (NIO) designs and manufactures high-tech electric vehicles in China. As a major player and innovator in connectivity, autonomous driving, and artificial intelligence technologies, it competes directly with Tesla (TSLA).

The main value for NIO comes from its competitive positioning in the luxury electric vehicle market (especially SUVs) in China, stemming from its comparable technology combined with its cheaper price point.

Furthermore, as a leading local manufacturer and innovator in high-priority cutting edge technology fields, the Chinese government has a vested interest in NIO’s continued growth and success. This should not only lead to continued financial support through difficult times, but may also lead to the government-controlled media stirring up popular opinion against its main competitors, as it has done with TSLA recently. (See Nio stock chart on TipRanks)

The company is expected to continue generating strong growth on the back of the re-opening of the global economy following the COVID-19 outbreak, as well as the continued robust growth of the Chinese middle class. Moreover, as its advanced automotive technologies continue to emerge and take a greater share of the overall global automobile market, demand for its products and technologies should grow.

That said, the company also has numerous challenges with which to contend. First and foremost, it already faces significant competition from larger companies, such as TSLA, that possess powerful innovative capabilities and strong brand images. Additionally, as a Chinese company, it faces significant political risk (as Alibaba (BABA) recently learned the hard way), accounting risk, and execution risk. The latter risk is due to the fact that it is still a smaller scale business that has to deliver on aggressive growth expectations.

Valuation Metrics

Despite these challenges, NIO still possesses a strong position in the space, giving it a significant edge to leverage in terms of industry-specific consumer data and network. However, its valuation remains elevated. The forward price to cash flow is a whopping 95.6x, and the company is not profitable yet on a GAAP basis, while simultaneously bleeding cash.

The good news is that revenue is expected to triple over the next two years and the business should finally be profitable on an EBITDA basis in 2022, though the EBITDA margin will still likely be razor thin at just 2.3%.

Between its backing from the Chinese government and its $47.2B cash and short-term investments stockpile, it should have the financial backing it needs to fund its ambitious ventures and reach profitability within a few years. However, it remains highly speculative given that it must deliver on massive growth expectations in a short period of time, against significant challenges.

Wall Street’s Take

From Wall Street analysts, NIO earns a Strong Buy analyst consensus based on 8 Buy ratings in the past 3 months. Additionally, the average analyst Nio price target of $61.91 puts the upside potential at 31.98%.

Summary and Conclusions

NIO is a highly speculative investment right now, as it has a very elevated valuation. Therefore, it must deliver on sky-high expectations in the face of numerous risks in order to deliver long-term investors a respectable return.

That said, it still has a lot going for it. Nio is strengthened by its status as a domestic leader in high-priority cutting edge technologies and a high visibility global industry. The Chinese government is likely to continue assisting the company directly and indirectly moving forward, and the strong tailwind from China’s growing middle class should also boost Nio significantly.

Overall, the business is likely to continue growing and analysts remain bullish on the shares here. That said, given its lofty valuation and steep climb to achieve profitability in the face of top-tier competition from the likes of TSLA, the stock remains a risky bet. Investors might be prudent to take that into account before establishing a position.

Disclosure: On the date of publication, Samuel Smith had no position in any of the companies discussed in this article.

Disclaimer: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities.

The post NIO: Great Business, But Valuation Is Sky-High appeared first on TipRanks Financial Blog.

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