Amazon (AMZN) drives Nasdaq 100 to record high despite strong performance

Amazon (AMZN, Financial) shares rose sharply, hitting an intraday peak with a nearly 3.3% gain that pushed the Nasdaq 100 Index to a new historic high. Analysts point out that Amazon shares remain undervalued despite the record highs.

The shares rose to $206.08, marking their highest level since July. A 2% increase was later adjusted. Since its low in August, Amazon shares have risen over 25% and are up 32% year-to-date, while the Nasdaq 100 Index is up 23%. Amazon's stellar performance comes amid a broader post-election market rally.

Media reports attribute Amazon's recent strength to a robust quarterly earnings report and particularly point to significant growth momentum in its Amazon Web Services (AWS) cloud division, which is expected to benefit from long-term AI-related trends. In addition, Amazon has expressed positive sales forecasts for the holiday season.

Mike Bailey, director of research at FBB Capital Partners, praised Amazon's overall excellent performance and highlighted its cloud business, e-commerce and advertising activities. Despite the skepticism, these departments function well and add significant value. The company's focus on costs and profitability makes it an attractive investment despite its high share price. Amazon, known for exceeding expectations and growing rapidly, is considered undervalued, making it a prime candidate for further investment.

Improved profitability has also eased concerns about Amazon's valuation. Its price-to-earnings ratio is 29, above the Nasdaq 100 average, but well below the decade-long average of over 53. Currently, Amazon remains a popular choice on Wall Street, with around 94% of analysts favoring it Recommend purchase. The stock's current price is approximately 15% below analysts' average price target, suggesting potential for further growth within the next 12 months.