When Amazon.com Inc. (Nasdaq: AMZN) crossed the $1,000 mark on May 31, TV host Jim Cramer was quick to throw out what he called a “red flag.”
Frankly, I think he was waving a white one…
Here’s why I say that. The host of CNBC’s Mad Money mostly looked at the price of the stock. He said that “psychologically” $1,000 is a lot to pay for a stock he feels is getting ahead of itself.
That brought him around to saying that other big tech leaders are riding a secular trend that could lose steam, hurting investors along the way.
I believe Cramer’s analysis is way off the mark for a couple reasons. First, Amazon still has a long runway in both retail and its cloud sales, where it remains the dominant firm.
Second, and more to the point, I actually predicted back on Oct. 30, 2013 that Amazon would hit this milestone. I said it would be among the “next” members of tech’s “Thousand-Dollar Club.”
So, today I’ll show you why my forecast was on the money for all the stocks I put in that group.
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If you’ve followed along with me for any length of time, you’ll know that I’m more than willing to make bold calls.
Then again, I grew up in a military high tech household and have knocked around Silicon Valley for 33 years. I’m not saying that to brag but to point out that I have tons of personal experience to back up my rigorous tech analysis.
Now I have to admit, predicting that five tech leaders would each sell for $1,000 a share going on four years ago struck some as going way out on a limb.
However, I backed it all up with solid data that I said would drive the stocks to new heights. I also noted that at the time many thought The Priceline Group Inc. (Nasdaq: PCLN) was “pricey” because it sold for $1,075 a share.
Today, Priceline trades for nearly $1,900 a share, gaining 76% along the way. But I don’t see Cramer waving the “red flag” over that one.
Fact is, three of my original picks have crossed the $1,000 barrier either straight up or on a split-adjusted basis. Another came within 40 cents of hitting my target just a few days ago. It could cross over any time now.
The fifth stock was so undervalued that it got bought out by a larger firm. With that in mind, let’s look at the factors that drove the five remaining members of the Thousand-Dollar Club and why there’s still money to be made on each one.
Let’s take a look…
Amazon was trading for $332 the day that column ran. I noted that CEO Jeff Bezos was determined to dominate online retail. Yes, I said, margins were thin at the time, because he keeps pouring money into backend operations.
Bezos has spent a small fortune on robotics and other platforms that ensure buyers get their products quickly. Indeed, Prime members often receive orders on the same day they make them.
That’s not all that makes Amazon a great company. Bezos was one of the first to see the shift to cloud computing in which clients get data and apps via the web rather than on their expensive networks. It’s now a roughly $12 billion a year business – and it could double in the next five years.
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Apple Inc. (Nasdaq: AAPL) hit my target price back on March 28 on a split-adjusted basis when it traded at $142.85. This proved to be the most controversial stock in the Thousand-Dollar Club.
Stuart Varney, the Fox Business host, never let me forget that bold call. But once it hit the target two months ago, I doubled down on that first one with a prediction in this column that Apple will be the first $1 trillion market-cap stock.
With a market cap of roughly $800 billion, it needs to advance by about 25%. But I’m not the only analyst making that call on Apple. For one, Warren Buffett agrees with me.
After all, Apple accounts for the bulk of all profits made in the entire smartphone segment. It now is the leader in wearables and is growing its high-margin services unit. That’s a roughly $25 billion business that also could double in the next five years.
Alphabet Inc. (Nasdaq: GOOGL) is the one stock in the group that, strictly speaking, has not yet made it into the club. But it came so very close one week ago.
Although it’s not a done deal yet, it’s just a matter of time before Google hits $1,000 a share. The firm still dominates online search and is one of the most successful firms on the planet at selling mobile ads.
Plus, it has restructured to make sure its moon-shot programs don’t rob money from its highly profitable core franchise. In the most recent quarter, the firm grew profits by 29%, and it now has nearly $90 billion in net cash on hand.
Netflix Inc. (Nasdaq: NFLX) came under sharp selling pressure in late 2015 when Wall Street doubted the firm could keep growing. By February of last year, it had fallen to $79.95.
But the leader in online video streaming kept making savvy moves. It has added more users overseas and lots of original content. The stock now trades at around $163 a share, more than double its 2015 low.
The stock split 7-for-1 in July 2015. That gives it an adjusted value of $1,141 a share, will above my target.
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Mastercard Inc. (NYSE: MA) is the one stock in this group that many might not consider a “tech firm.” But the truth is that this credit card processor has made tech the center of its operations.
It has deep expertise in digital-payments processing for consumers, retailers, banks, government agencies and more. And it uses technology to deliver that expertise to those customers.
The stock split 10-for-1 in early 2014. So, its recent price of $123.40 translates to an adjusted price of $1,234, or more than 20% above my $1,000 target.
Add it all up and you’ll see that guys like Cramer should not put too much focus on the fact that Amazon just hit $1,000.
Sure, it sounds like a lot of money. But as we have just proven, it’s one of several tech leader that are right on track.
Again, if you followed along with our twice-weekly chats and acted on my advice, your net worth is burning up the charts.
But if not, the next time you hear about Jim Cramer waving the “red flag,” just consider the source… and think of all that money you could have made.
- Strategic Tech Investor: The Next Members of Tech’s “Thousand-Dollar Club.”