The best could still be ahead for surging Amazon — and here's how to play it

Amazon could see more upside ahead, some strategists say, following a first quarter in which Amazon shares gained 18 percent and logged eight all-time highs, including on Friday.

Amazon's potential for expansion in the consumer and grocery delivery services will drive the e-commerce giant's growth in years to come, said David Seaburg, head of sales trading at Cowen & Co.

"The growth in grocery, in our opinion, is really going to drive the growth of the company for the next five years," Seaburg said Friday on CNBC's "Trading Nation."

The U.S. food and beverage segment holds the biggest potential for revenue growth, Seaburg said.

Cowen & Co. analyst John Blackledge places a $1,050 price target on the stock, an 18 percent gain from Friday's closing price of $886.54. Seaburg said that may even be "a little conservative."

Analysts' average rating for Amazon is buy, with an average price target of $956.88 — 8 percent above Friday's closing.
Susquehanna analyst Shyam Patil's price target of $1,250 is the most bullish, according to FactSet.

In a Feb. 2 note published as Amazon reported a revenue miss in the fourth quarter, Patil wrote that investors should buy Amazon "aggressively on any potential dislocation."

"We continue to view AMZN as one of the top large-cap growth stories in Internet," Patil wrote, pointing specifically to the company's strength in e-commerce and cloud services.

According to Stacey Gilbert, Susquehanna's head of derivative strategy, using options would be the best way to play Amazon right now.

"Options in Amazon are about as cheap as we have seen, so if you are uncomfortable that our $1,250 price target is too bullish, or you're just concerned that that downside could be higher probability than we're pricing, the options are certainly an attractive way to play it right now," Gilbert said.

For example, investors may want to go out three months and buy an at-the-money call option. That would cost a little over 4 percent of its spot price, so the investment wouldn't be cheap "in dollar terms," Gilbert said, but as a percent of spot price, "this is in the bottom 10 percentile of what we've seen over the last two years."

"So all that being said, if you wanted the embedded protection that comes in options, the options themselves are about as cheap as we've seen," she said.


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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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