Amazon Stock Faces Short-Term Pressure Amid Support Levels and NBA Deal Insights

Technical Analysis

Amazon.com, Inc. (AMZN) closed at $180.83 on July 24, 2024, reflecting a notable decline of $5.58 (-2.99%) from the previous session. The stock is currently trading near its support level of $179, which may present a buying opportunity if it holds; however, the negative momentum indicated by the 14-day RSI of 23 suggests that the stock is oversold and could face further downward pressure in the short term.

The 50-day moving average (MA) of $187.50 is well above the current price, indicating a bearish trend. The 200-day MA at $166.49 supports the notion of a longer-term bullish outlook if the stock can stabilize above this level. The MACD reading of 3.19 suggests a potential reversal may occur if buying interest returns.

Volatility, as measured by the Average True Range (ATR) of 2.62, indicates that the stock is subject to significant price fluctuations, warranting cautious trading strategies.

For the next trading day (July 25, 2024), the price is expected to test the support at $179, with resistance at $185.99. The combination of recent heavy volume and proximity to support suggests a possible rebound, but the overall trend remains uncertain until clearer signals of recovery emerge.

Fundamental Analysis

Amazon's market capitalization stands at approximately $1.88 trillion, reflective of its substantial presence in the tech market. The forward-looking earnings per share (EPS) ratio of 3.58 and a price-to-earnings (P/E) ratio of 50.51 indicate that the stock is trading at a premium to its earnings, which could raise concerns among value investors.

However, a significant recent development is the announcement of an 11-year media rights deal with the NBA, which positions Amazon strategically within the burgeoning sports streaming sector. This deal could catalyze revenue growth, positively influencing long-term profitability and market sentiment.

The discounted cash flow (DCF) analysis estimates the intrinsic value of AMZN at approximately $52.50, indicating that the stock is overvalued based on its current market price. This discrepancy highlights potential caution for investors who are focused on intrinsic valuations.

Intrinsic Value and Long-term Potential

The intrinsic valuation derived from DCF analysis suggests that while AMZN may have short-term headwinds, the long-term potential attributed to its expanding media rights, particularly with a popular entity like the NBA, could enhance its growth trajectory. As the digital streaming landscape continues to evolve, Amazon's investments in content acquisition and technology will be crucial for sustaining competitive advantages against rivals like Comcast and Disney.

Overall Evaluation

Given the current mix of technical indicators, broad market sentiment, and strategic business developments, Amazon.com, Inc. could be categorized as a Hold. The stock's recent price action and significant upcoming news surrounding its earnings report on August 1, 2024, may impact short-term pricing dynamics, creating opportunities for a more favorable entry point.

Investors may opt to wait for more clarity post-earnings to assess the impact of the NBA deal on financial metrics and guidance. Although the fundamentals support long-term viability, the current overvaluation combined with immediate price pressures could hinder fresh investments at this stage.