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Why Is Bezos Selling Amazon Stock, and Can AMZN Shares Still Rise?

Barchart - Wed Feb 14, 11:40AM CST

Amazon (AMZN) has been in the news lately, as the company’s founder and former CEO Jeff Bezos has sold billions of dollars worth of shares over the last week. While the billionaire's large AMZN stock donations drew headlines late last year, this is the first time since 2021 that Bezos has sold AMZN shares outright - leaving investors wondering why he is selling Amazon stock, and whether the shares could still rise from these levels.

For context, Bezos sold around $20 billion worth of Amazon shares between 2020 and 2021. In its filings with the SEC, Amazon notified that Bezos planned to sell 50 million Amazon shares by January 31, 2025. However, it seems that Bezos is in a hurry, and has already sold around half of the shares that he intended to sell over the next year.

Why Is Jeff Bezos Selling Amazon Stock?

Bezos selling Amazon shares hasn’t come out of the blue, as the company did notify shareholders about the intended sale in the 2023 annual report. Also, it is not unusual for founders to sell shares after they disengage from active involvement in the company. For instance, Bezos's previous sale of Amazon shares came around the time when he was looking to transition to the role of executive chairman while handing over the CEO baton to Andy Jassy, who was then heading the company’s lucrative Amazon Web Services (AWS) business.

Bezos also frequently needs funds for Blue Origin, his space exploration startup, which is burning cash - unlike Amazon, which has become a free cash flow-generating behemoth, and generated free cash flows of $36.8 billion in 2023.

Bezos Also Donates to Charities

Bezos also needs cash for his philanthropic activities, and has committed to donate most of his wealth over his lifetime.  While the previous stock sale was accompanied by leadership changes at Amazon, the current round of stock sales was preceded by personal changes, as Bezos announced last November that he would move to Miami from Seattle to be closer to his fiancée Lauren Sanchez and his parents.

While Bezos has been selling his shares quite expeditiously, even his previous round of stock sales was also quite condensed. And after the recent rally in Amazon stock, it is not surprising that Bezos is trying to cash out some of his stake in a hurry.

Can Amazon Stock Still Go Higher?

Analysts still expect Amazon stock to rise from these levels, and its mean target price of $202.25 is almost 19% higher than the current price levels. Many brokerages upwardly revised Amazon’s target price after the company reported a strong set of numbers for Q4, which featured a record net profit, an expansion in growth of AWS, and better-than-expected Q1 guidance, among other notable metrics.

Despite Bezos offloading billions of dollars worth of Amazon shares, the stock hasn’t reacted negatively - and, if anything, has continued its upward momentum. While the stock did fall yesterday, that was more the result of the broader market meltdown after hotter-than-expected January inflation data, rather than being a reaction to Bezos’ stock sales.

Why Amazon Looks on Track to Become the Next $2 Trillion Company

Looking at analysts’ target price, Amazon looks on track to become the next $2 trillion company, joining ranks with Microsoft (MSFT) and Apple (AAPL), which are currently the only two companies in that club - and in that specific order, after Apple lost its position as the world’s largest company to the Windows maker.

I believe that while Amazon stock has risen sharply over the last year, the rally is still far from over. The company’s cost cuts and focus on efficiency are expected to support the bottom line, and its top-line growth is also stabilizing.

Generative AI, which Amazon’s CEO Andy Jassy termed an “area of pervasive focus and investment” for the company during the Q4 earnings call, is another key long-term growth driver. While the business currently does not contribute much to Amazon’s revenues, Jassy said during the Q4 earnings call, “We believe it will ultimately drive tens of billions of dollars of revenue for Amazon over the next several years.”

With a dominant presence in ecommerce and cloud, coupled with growing digital advertising, streaming, business-to-business (B2B) ecommerce, and more recently the pivot to generative AI, Amazon is a long-term buy-and-hold story, irrespective of Bezos’ stock sales.

On the date of publication, Mohit Oberoi had a position in: AMZN , AAPL , MSFT . All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.

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