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Amazon Stock Analysis: Potential for Growth Amid Technical Signals

StockInvest.us, 1 month ago

Amazon Technical Analysis

Amazon.com, Inc. (AMZN) closed at $184.72 on May 2, 2024, with a notable uptick of 3.20% from the previous session. Currently, the stock is trading below its annual high of $189.77 and significantly above the annual low of $103.55. The volume on the latest close was 23.87 million shares, below the average volume of 42.24 million, suggesting less trading activity than usual.

The Relative Strength Index (RSI) at 48 indicates that the stock is neither overbought nor oversold. The MACD, at -0.53, signals a bearish trend in the short term, despite the recent price increase. The proximity of the price to the 50-day moving average ($178.67) and the 200-day moving average ($151.82) suggests bullish sentiment in the medium to long term. However, short-term fluctuations should be expected as indicated by a slightly higher ATR of 2.79, which shows moderately high volatility.

Support and resistance are identified at $179 and $185.07, respectively. A break above the resistance could push the stock towards a retest of the yearly high. Conversely, a drop below the support level could see the price approaching the 50-day moving average, providing a potential buying opportunity for technical traders.

Fundamental Analysis

Amazon's market capitalization stands at approximately $1.94 trillion, underlining its status as a major player in the tech and e-commerce sectors. The P/E ratio is relatively high at 52.22, indicating that the market may be expecting higher earnings growth in the future compared to its peers.

The earnings per share (EPS) of $3.57 combined with the future earnings announcement date set for August 1, 2024, points to stability, but investors will be closely watching for growth indicators in its cloud computing division, AWS, and possible expansions in its e-commerce operations.

Recent news highlights Amazon's benefit from its diversified business model, particularly its lucrative AWS segment. With the continued expansion and innovation in cloud computing, AWS remains a critical component of Amazon’s valuation and growth prospects.

Amazon Intrinsic Value and Long-Term Investment Potential

Considering the Discounted Cash Flow (DCF) valuation of $47.69, there seems to be a stark disparity with the current trading price, suggesting that the stock is overvalued based on future cash flow projections. Nonetheless, the intrinsic value calculation must be cautiously interpreted as it heavily depends on the assumptions about future growth rates and discount rates.

Amazon's diverse portfolio, including e-commerce, cloud computing via AWS, and various other tech-driven initiatives, positions it well for long-term growth despite challenges in the competitive landscape. This diversified approach helps mitigate sector-specific risks and capitalizes on growth trends across different industries.

Market Sentiment and Stock Evaluation

Wall Street's sentiment on Amazon is predominantly bullish, with a strong buying consensus from analysts. This sentiment is supported by the fact that 39 analysts rate it as a "Buy" and only three suggest a "Hold," with no "Sell" ratings. Given the high target price predictions ranging up to $270, there is a potential upward movement expected.

Overall Evaluation

Category: Hold

Amazon exhibits solid fundamentals with strong growth potential, especially from its AWS segment and global e-commerce dominance. However, the overvaluation indicated by the DCF, and short-term technical bearish signals suggest potential risk in immediate price movements. Investors might benefit from waiting for a more favorable entry point or any signs of price adjustments aligning closer to intrinsic value estimates. This approach balances between immediate vulnerabilities and robust long-term prospects, thus categorizing AMZN stock as a "Hold" for now. This status could change with significant shifts in market dynamics or upcoming financial results.

Check full Amazon forecast and analysis here.