Amazon (AMZN) Holds Strong Amidst Mixed Technicals and Regulatory Scrutiny, Analysts Bullish

StockInvest.us, 4 weeks ago

Amazon Technical Analysis

Amazon.com, Inc. (AMZN) concluded trading on June 18, 2024, at $182.81, reflecting a 0.68% decline from the previous day. The stock oscillated between a low of $181.43 and a high of $184.29 during the trading session, placing it slightly below its 50-day moving average of $182.99 yet markedly above its 200-day moving average of $159.60. These metrics indicate a relatively short-term neutrality but a robust longer-term uptrend.

The Relative Strength Index (RSI14) stands at 52, suggesting that the stock is neither overbought nor oversold. Yet, the MACD over a three-month period is -1.50, implying bearish momentum. The Average True Range (ATR) of $1.89 highlights the stock's moderate volatility. With immediate support at $179 and resistance at $183.15, any movement through these levels could signal a more definitive directional bias.

Given the volume of trades (36.34 million) slightly below the average volume (38.15 million), liquidity remains strong although the slight dip in trading volume may indicate reduced investor interest short-term.

Fundamental Analysis

Amazon's market cap stands at $1.90 trillion, underscoring its commanding presence in the marketplace. Although the stock's PE ratio of 51.35 may seem high, it is not unusual for a tech titan known for aggressive growth. The company's EPS is $3.56, indicating solid earnings performance.

Recent unfavorable news includes a series of fines totaling nearly $6 million for failure to disclose warehouse work quotas in California. While these incidents may tarnish Amazon’s public relations image and result in short-term operational disruptions, they are financially inconsequential given Amazon’s scale. However, increased regulatory scrutiny could pose risks to long-term operational flexibility.

Amazon DCF valuation models place Amazon's intrinsic value at $52.12, presumably signaling overvaluation. However, this intrinsic valuation should be contextualized within the broader tech sector, where growth potential often justifies a premium.

Predictions for Next Trading Day and Upcoming Week

In the immediate term, bearish technical indicators such as the negative MACD and the recent close below the 50-day moving average suggest potential downward pressure. However, given the support level at $179, major declines may be limited.

For the upcoming week, investor sentiment may hinge on whether Amazon can sustain above this support level amidst regulatory concerns. If adverse sentiments stabilize, there might be an attempt to breach the $183.15 resistance, contingent upon broader market movements and any further news developments. The analyst consensus underscores this favorable outlook, with 41 buys and only 3 holds. Target prices span from $84 to $270, with a median target of $200, hinting at a significant upside.

While the current stock price exceeds the discounted cash flow-based intrinsic valuation, the growth potential in emerging sectors such as AI, represented by rivals like Nvidia, should not be underestimated.

Overall Evaluation

Given the synthesis of technical and fundamental factors, Amazon.com, Inc. can be categorized as a 'Hold' candidate. The unfavorable fines and slightly bearish short-term technical indicators advise caution, yet its robust long-term fundamentals and broad market dominance suggest retaining positions for future growth.

Check full Amazon forecast and analysis here.