Amazon.com (AMZN) shares will reach $3,000 between mid-2021 and mid-2022, according to a Piper Jaffray analyst. The firm said that this move, which would be a more than 60% jump from current levels, is based on Amazon meeting what it considers conservative growth targets.

PIPER PREDICTION

Piper Jaffray analyst Michael Olson predicted that shares of Amazon.com will reach $3,000 within the next 24-36 months, or between mid-2021 and mid-2022. In a research note to investors, Olson said his confidence in this 65% jump from current levels is based on what he thinks are "relatively conservative" growth and valuation targets. 

Specifically, Olson said he assumes a multi-year deceleration in growth for every major category of Amazon's business, along with "very minimal" adjustment to comp group multiples, "despite Amazon growing significantly faster than comps in both the cloud and advertising segment." Further, Olson assigned a discounted multiple for Amazon relative to e-commerce peers for the retail segment. "Adjusting for the value of the AWS segment and Advertising, the company's core retail segment is trading at a level that implies that business is valued below a traditional brick & mortar multiple of sales," the analyst wrote.

Amazon shares can reach $3,000 with no major acquisitions or other significant changes to the business, Olson contended. He acknowledged, however, that a potential Web Services spin-off would "no doubt" help to highlight the "relatively low valuation of the other segments."

Piper Jaffray's Olson said he examined Amazon's valuation in two ways, a traditional brick-and-mortar multiple for the company's core retail business and a discounted e-commerce multiple. "The difference between applying the B&M multiple to core retail vs. using the e-commerce multiple is significant, resulting in a ~$500B disparity in valuation. We believe Amazon core retail should be valued more closely to the Ecom multiple and, therefore, see significant upside potential," Olson wrote. He estimated that Amazon's advertising segment revenue will grow 26% year over year in 2020 vs. a comparative average of 17% growth. Meanwhile, cloud revenue from Amazon Web Services is expected to grow 31% in 2020.

The analyst maintained an Overweight rating on Amazon.com with a 12-month price target of $2,225.

WHAT'S NOTABLE

Berkshire Hathaway's (BRK-A) Warren Buffett disclosed earlier this month that its one new buy during the first quarter was Amazon. Buffett told CNBC at the time that Berkshire had been buying shares of Amazon and he had been a fan of the company, and "an idiot for not buying" in the past. He added, "But I want you to know it’s no personality changes taking place." 

PRICE ACTION:  

In Friday morning trading, shares of Amazon were up 1.3% to $1,838.79. Amazon shares are up 20% this year, but are off more than 10% from their all-time high, which had previously put its worth at more than $1T.