Amazon stock is exciting for these two reasons: analyst

·Anchor, Editor-at-Large
·3 min read

Amazon's (AMZN) once hot stock has been anything but in 2021 as investors fret about sales at the tech giant's core retail business plunging this year as it cycles through comparisons to the start of the pandemic fueled e-commerce boom in 2020. 

But widely followed tech analyst Brent Thill of Jefferies says putting too much focus on Amazon's retail business is misguided when considering the company has numerous other growth juggernauts. As long as those juggernauts — Amazon Web Services, advertising and Prime — continue their blistering paces of growth, Amazon's stock could break free from its slump, bulls like Thill contend. 

"I think the power of AWS and their advertising and other software parts of their business and subscription models are the most exciting," Thill said on Yahoo Finance Live. "I think investors are really concerned about the overall e-commerce business in the short-term given how big the comparisons are."

Thill's latest research opines that Amazon has 70% upside potential in terms of valuation over the next three years driven by growth in AWS and advertising. That would put Amazon's stock at $5,700 or so compared to $3,400 currently. 

"This implies Amazon's market cap approaches $3.0 trillion by 2024 and this does not include potentially meaningful contributions from multi-billion dollar opportunities in health care, home security, smart-home devices, and entertainment. The company also has room for further expansion in areas such as apparel, B2B [business-to-business], and SaaS [software-as-a-service]," Thill wrote earlier this month.

Thill maintains a $4,000 price target on Amazon and a Buy rating. 

APRIL 15th 2021: Amazon Prime now has more than 200 million member subscribers, says Jeff Bezos as he prepares to step down as CEO later this year. - File Photo by: zz/STRF/STAR MAX/IPx 2020 9/5/20 Images of corporate logos are displayed online on a laptop computer. While the economy has been significantly impacted during the worldwide coronavirus pandemic, some companies - such as Amazon.com, Inc. which specializes in technology and e-commerce - have prospered.
APRIL 15th 2021: Amazon Prime now has more than 200 million member subscribers, says Jeff Bezos as he prepares to step down as CEO later this year. - File Photo by: zz/STRF/STAR MAX/IPx 2020 9/5/20 Images of corporate logos are displayed online on a laptop computer. While the economy has been significantly impacted during the worldwide coronavirus pandemic, some companies - such as Amazon.com, Inc. which specializes in technology and e-commerce - have prospered.

Amazon is slated to report first-quarter earnings on Thursday after the close of trading. 

The company's guidance calls for sales growth of 33% to 40% year-over-year to between $100 billion and $106 billion. Operating income is seen in a range of $3.5 billion to $6.5 billion compared to $4 billion a year earlier. 

Analysts are modeling for sales of $106 billion and $6.5 billion in operating income, in large part on the back of strength in those aforementioned juggernaut businesses. Core retail is also expected to be a solid performer as the pandemic stretches on, but perhaps not as robust a sales grower as most of 2020.  

Indeed Amazon's stock reflects the caution on the Street regarding growth rates in the retail business.

Year-to-date, Amazon shares are up 5%, versus a 12% gain on the S&P 500 and 9.5% pop on the Nasdaq Composite. It's the third worst-performing component of the closely watched FAANG index (Facebook, Amazon, Apple, Netflix and Google) of tech giants — Apple shares are up 1.4% on the year while Netflix has dropped 7%.

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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