Each day, Benzinga will take a look back at a notable market-related moment that happened on this date.
What Happened? On Dec. 16, 1998, CIBC Oppenheimer analyst Henry Blodget raised his price target for Amazon.com, Inc. (NASDAQ:AMZN) 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 (OTC:BMWYY) bought Rolls-Royce Motors for $570 million. Microsoft Corporation (NASDAQ:MSFT) 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% from $150 to $400.
Before the upgrade, Amazon was trading at around $243 and was already up a whopping 269% 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% 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.
Photo: Hubert Burda Media, Flickr
