Amazon Stock Faces Bearish Sentiment Amid Regulatory Concerns and High Valuation Risks

Technical Analysis

As of the last close on August 20, 2024, Amazon.com, Inc. (AMZN) finished at $178.88, reflecting a modest gain of $0.66 (0.37%). The stock is currently trading below its 50-day moving average of $184.08, indicating a bearish sentiment. The Relative Strength Index (RSI) stands at 41, suggesting that AMZN is nearing the oversold territory but is yet to indicate a clear reversal. The MACD value of -8.87 highlights a significant downward momentum. The stock found support at $176.44, while the next resistance level is at $193.25, where potential sell pressure could emerge.

With an average volume of 42.64 million and current trading volume at 4.91 million, interest remains relatively low but could increase depending on market conditions and news developments.

Fundamental Analysis

Amazon's market capitalization is approximately $1.90 trillion, demonstrating its stature in the tech sector. The trailing twelve months' earnings per share (EPS) is reported at 4.19, resulting in a high price-to-earnings (PE) ratio of 43.29, which may suggest that the stock is overvalued based on traditional metrics. The discounted cash flow (DCF) analysis indicates an intrinsic value of around $57.69, which is substantially lower than its current trading price, thus raising concerns about inflated expectations among investors.

Recent news regarding Amazon signals challenges ahead. The company's increased spending on artificial intelligence is straining profits, contributing to negative sentiment among investors. Additionally, allegations of predatory pricing practices in India may raise regulatory concerns that can impact long-term growth prospects. A class-action lawsuit against Amazon-backed Anthropic over copyright infringements also poses reputational risks.

Short-Term Predictions (Next Trading Day and Upcoming Week)

For the next trading day, August 21, 2024, AMZN is likely to experience volatile trading, primarily influenced by the latest news associated with its business operations and profitability pressures. If the selling pressure continues and the stock breaches the support at $176.44, it may find itself in a more concerning downturn. Conversely, if it manages to stay above support, a rebound toward the resistance at $193.25 could be within reach in the short term.

Over the upcoming week, continued scrutiny over its AI investments and regulatory challenges may weigh heavily on sentiment. The anticipated earnings announcement set for October 24, 2024, adds uncertainty. Thus, short-term performance may trend sideways but remains vulnerable to news shocks.

Long-Term Investment Potential

In the long term, while Amazon remains a leader in e-commerce and cloud computing with vast market potential, the looming regulatory issues and criticisms over expenditure strategies could hinder its growth trajectory. The high PE ratio indicates that expectations are excessively high, which might make it difficult for the company to meet future earnings projections without significant operational improvements.

Overall Evaluation

In conclusion, the current analysis categorizes AMZN as a 'Hold' candidate. This designation is due to the stock's elevated valuation relative to its intrinsic value, the present negative sentiment fueled by operational challenges, and a mixed outlook for short-term price movements. Investors should exercise caution given the risks outlined, while potentially maintaining existing positions for longer-term recovery as fundamentals improve.