Maybe Just Put 100% Into $AMZN?

There is an argument that can be made that Amazon is significantly undervalued in the stock market.

The Pro Case

The stock currently trades at $2,221 per share.
Morningstar says its estimate of the fair value of the company is $3,850 per share. The stock would have to rise 73% to meet that figure.
SimplyWall.st puts the fair value at $5,250, a 136% rise from here.
Finbox says the fair value is $3,105, a 39% rise from here.
Joseph Carlson lays out a pretty good case for Amazon on his Youtube channel.

So, would it be a smart idea just to bet half of my remaining cash on Amazon?

Amazon is not a dividend-paying stock. This play is not for income. It’s for short-term (1-2 years) capital appreciation.

But imagine I can get even a 40% return on investment in two years! That will far exceed any dividend-paying stock. And I can sell the shares at that time and reinvest the profits back into income.

I guess this was my thought process buying MGK. Companies like Apple, Amazon, Microsoft, and Google will be quick to bounce back. They have wide moats, and there is no competitor knocking on the door that can take their place (unlike Netflix or Tesla).

But I have a particular conviction about Amazon as a company. It’s more clearly oversold than the rest.

I love Microsoft as a company, but I can’t really argue that its stock price is too low or too high from the current level. Maybe “Office” is on its way out as a product. Maybe Windows is threatened by Apple macOS. I can see the factors that make people question what it’s worth.

The Con Case

What is looming on the horizon that can disrupt Amazon’s lead in any category?

Several websites list Amazon’s fair value as being lower than the current price:

Seeking Alpha says that the stock is 2X to 3X higher than its fair value
Wallstreet Zen says the fair value is around $2,024
Amazon’s P/E ratio is currently 52X, which is considered richly valued compared to other competitors

Will the mega-retailers like Walmart, Target, Macy’s, and all the global competitors get their digital act together? Possible. My wife just bought something from Walmart online the other day. Maybe Walmart.com gains sales and Amazon.com starts to lose sales?

Is their growth permanently reduced? They showed 7% sales growth in the last quarter. Maybe, like Netflix, Amazon is fully saturated. There is no more low-hanging fruit in the online retail space. Maybe they are a 7% growth company, not a 25% growth one.

Is there an anti-trust case on the horizon? Will the EU or US government tell them to separate AWS from the online shopping arm? Or to stop copying successful retailers that use their platform using Amazon Basics?

Will warehouse workers unionize? Raising costs to deliver beyond where it’s profitable? Will Amazon be forced to raise prices, making other competitors less expensive?

Will there be a recession, driving down consumer spending for a few years?

Conclusion

Maybe this is not a slam dunk case.

I think Amazon will find its mojo again. They will have a quarter or a year of adjustment, reducing costs in places where costs got out of control. And then they’ll be back delivering massive value to its customers.

I could be wrong though. There are risks, for sure.

For that reason, I won’t be committing all or even half of my remaining cash to $AMZN. I might put more money in $MGK, or try to find a better ETF that focuses more on these particular names like Google, Amazon, Microsoft, Facebook, etc.