Amazon (AMZN) Shows Strong Bullish Momentum and Market Cap Growth, Making it a Top Buy Candidate, 3 weeks ago

Amazon Technical Analysis, Inc. (AMZN) closed at $197.85 on June 27, 2024, reflecting a 2.19% increase from the previous trading day, evidencing strong upward momentum. Key technical indicators underscore bullish sentiment: its Relative Strength Index (RSI14) at 71 indicates it is approaching overbought conditions, signifying strong investor interest, though it may face short-term correction.

The 50-day moving average stands at $183.44, significantly above the 200-day average of $161.36, suggesting a bullish trend continuation. The upward MACD (3-month) value of 1.38 adds further bullish confirmation. Additionally, the stock shows a narrow trading range with an Average True Range (ATR) of 2.09, highlighting limited volatility.

Support is clearly defined at $185.99, which can serve as a pivot point. The stock's sharp ascent to its year high of $199.84 with no apparent resistance in the immediate vicinity demonstrates robust bullish momentum that may extend further. The increased trading volume of 73.57 million, nearly doubling the average volume of 41.06 million, indicates heightened market activity and buys interest.

Fundamental Analysis

Amazon boasts a market capitalization of $2.06 trillion, joining the elite ranks with its stellar market cap growth. Earnings per share (EPS) of 3.56 and a Price-to-Earnings (PE) ratio of 55.58 imply the stock is trading at a high multiple, reflecting investors’ strong growth expectations.

Recent news plays a pivotal role; Jim Cramer’s bullish insights likening Amazon to a ‘retail Death Star’ underscores the company’s aggressive competitive strategies. Amazon’s novel ventures, including its China-linked bargain shop and the merging of Amazon Clinic with its One Medical service, portray an innovative expansion, fostering longer-term growth avenues.

Conversely, notwithstanding the bullish consensus, JPM consensus target varies with a high of $270 and a low of $84, showing some disparity in expectations. The consensus of ‘Buy’ with a majority agreement (40 Buy, 3 Hold) bolsters confidence in prospective performance.

Amazon DCF analysis presents an intrinsic value at $50.87, significantly lower than the current price, suggesting the stock is potentially overvalued from a pure discounted cash flow standpoint.

Short-term Outlook

For the next trading day, continued bullish momentum is anticipated, likely pushing the stock above its current high of $199.83 as it moves towards hitting new 52-week highs. However, investors should remain cautious of minor corrections due to overbought RSI levels.

In the upcoming week, with substantial trading volume and recent strategic announcements, the stock appears poised to continue its upward trajectory, potentially consolidating if it surges past the $200 mark.

Intrinsic Value and Long-term Investment Potential

While the DCF-derived intrinsic value suggests overvaluation, Amazon’s robust growth, innovation, and strategic positioning in the retail and healthcare sectors provide a compelling long-term growth narrative. The PE ratio, while high, reflects expected high growth rates, justifying long-term investment consideration against a backdrop of ongoing market dominance.

Overall Evaluation: Buy Candidate

AMZN demonstrates strong technical and fundamental bullish signals, marked by recent strategic maneuvers and favorable market sentiment. Given the stock’s upward momentum, market cap milestone, and positive analyst consensus, it categorizes Amazon as a ‘Buy’ candidate, assuming lags in any broad corrective action typical of overbought conditions.

Check full Amazon forecast and analysis here.