What Happened?
On Dec. 16, 1998, CIBC Oppenheimer analyst Henry Blodget raised his price target for Amazon.com Inc. from $150 to $400.Where Was the Market?
The S&P 500 closed at 1,161.94, and the Dow closed at 8,790.60.What Else Was Going On in the World?
In 1998, BMW bought Rolls-Royce Motors for $570 million. Microsoft Corporation released Windows 98. Average U.S. monthly rent was $619.Blodget’s Call
On Dec. 16, 1998, Blodget reiterated his Buy rating for Amazon and raised his price target for the soaring stock by 167 percent from $150 to $400.Before the upgrade, Amazon was trading at around $243 and was already up a whopping 269 percent in the previous six months. Blodget’s new price target drew ridicule from many critics at the time, but it also sent Amazon shares up 19 percent on the day the target was released.
Blodget said setting price targets for Amazon and other tech stocks is more “art than science” and warned investors that many of the red-hot tech stocks advance in a “three-steps-forward, two-steps-back fashion.”
“We would not, therefore, go hog-wild with the stock at current levels in the expectation that it will go straight up from here,” Blodget said. “An investment in the shares clearly requires a strong stomach and a great deal of faith.”
Incredibly, Amazon would hit Blodget’s sky-high price target within three weeks, making Blodget look like a genius and landing him a job at Merrill Lynch. Unfortunately, when the dot-com bubble burst, Amazon shares tanked. Blodget did not recommend clients sell the stock until it had dropped below $10 per share in 2001.
In 2003, Blodget agreed to a permanent ban from the securities industry as part of a fraud settlement with the U.S. Securities and Exchange Commission. Today, Blodget is the CEO of Business Insider.
