Amazon (AMZN) Shows Technical Oversold Condition Amid Long-term Growth Potential

Technical Analysis

Amazon.com, Inc. (NASDAQ: AMZN) closed at $178.34 on June 04, 2024, with no price change from the previous close. The trading volume of 26.16 million was significantly lower than the average volume of 39.25 million, indicating decreased market activity.

The Relative Strength Index (RSI14) of 25 signals that the stock is in an oversold condition, which might suggest a potential rebound. The 50-day moving average of $182.26 is above the current price, indicating potential upward resistance, while the 200-day moving average of $157.08 is below the current price, showing that the long-term trend remains positive.

The stock’s Moving Average Convergence Divergence (MACD) of 0.53 reflects a bullish trend over the last quarter. The Average True Range (ATR) of 1.95 suggests moderate volatility. Support and resistance levels are set at $178.15 and $179, respectively, providing a tight range for potential price movements.

Fundamental Analysis

Amazon’s market capitalization of $1.87 trillion positions it as a major player in the industry. The stock’s Price to Earnings (P/E) ratio stands at 50.24, suggesting the market expects high growth from Amazon relative to its earnings. The Earnings Per Share (EPS) of $3.57 reflects solid profitability.

The discounted cash flow (DCF) valuation at $49.58 is notably lower than the current stock price, possibly indicating overvaluation in the short term. Analysts’ target consensus is $186.64, with a high of $270 and a low of $84, showing optimism but also significant variability in expectations.

Amazon is expected to announce earnings on August 1, 2024. Analysts' consensus indicates a strong "Buy" sentiment, with 40 buy ratings and no sells.

Recent News Impact

Several recent developments could influence Amazon's stock:

1. Labor Union Affiliation: The move to affiliate with the Teamsters might raise operational costs and affect margins due to potential changes in labor relations. 2. Investment by Josh Brown: Increased positions by notable investors can enhance market confidence. 3. Tech Partnerships: Collaboration with Swift Navigation to use AWS strengthens Amazon's positioning in the tech ecosystem, further expanding its cloud services. 4. Prime Membership Boost: The Grubhub Partnership enhances Prime's value proposition, potentially driving higher subscriber retention and growth. 5. Warren Buffett’s Endorsement: Favorable opinions from influential investors can positively influence market perception and investor sentiment.

Short-term Prediction

For the next trading day, the stock may experience minor increases due to the RSI suggesting an oversold condition, alongside positive investor sentiment from recent strategic partnerships and notable endorsements. Over the upcoming week, moderate volatility is expected, with potential consolidation around the $178-$179 resistance level.

Intrinsic Value and Long-term Investment Potential

Despite a current apparent overvaluation based on DCF, Amazon’s intrinsic long-term potential remains robust owing to its dominant market position, diversified revenue streams, innovation in cloud services, and growing Prime membership. However, labor costs and potential regulatory scrutiny are risks to monitor.

Overall Evaluation

Amazon.com, Inc. (AMZN) is classified as a Hold. This rating takes into account the recent oversold technical indicator, robust long-term fundamentals, strong buy consensus, and influential endorsements balanced against short-term volatility, current DCF overvaluation, and potential increased operational costs from union activities.