Sign InAmazon's Potential for Growth and Price Appreciation Suggests a 'Hold' Rating
Summary
Amazon.com, Inc. (NASDAQ: AMZN) has experienced a pullback in stock price but remains profitable, with potential for future growth in the healthcare sector, making it a potential hold for investors. (Analysis date: July 26, 2023)
Fundamental Analysis
Amazon.com, Inc. (NASDAQ: AMZN) is considered an industry leader in e-commerce as well as cloud services through its AWS segment. Over the past couple of months, the stock has been under pressure, pulling back from its year high of $146.57 to its current price of $128.15.
The earnings per share (EPS) stand at $0.42, implying the company is profitable. However, the stock has a high price-to-earnings ratio (PE) of 305.12, suggesting that investors are paying quite a premium for the earnings generated per share, which may indicate an overestimated stock.
The news reflects Amazon's continuous endeavor to expand in the health space with the launch of HealthScribe, a generative AI tool intended to help with administrative tasks in healthcare facilities. This could potentially drive future growth and diversification for the company.
Technical Analysis
Upon examining the technical indicators, the 50-day moving average of $125.14 truncated at two decimal places, is above the 200-day moving average of $105.14, signaling a relatively bullish trend. The Relative Strength Index (RSI14), sitting at the halfway mark (50), neither indicates overbought nor oversold conditions.
Moreover, the MACD, a trend-following momentum indicator, is positive at 1.82, highlighting a bullish sentiment in the short term. However, the recently traded volume of 49.92 million shares was lower than the average volume of 62.60 million, indicating less trading activity.
Forecasts and Predictions
Based on opening and closing prices, the stock appears to fluctuate within a range, as demonstrated by the daily low of $126.11 and high of $129.08. The discounted cash flow (DCF) measures are also higher than the closing price at $133.44.
For the upcoming trading day of July 27, 2023, considering the recent activity, news, and technical indicators, the price may hover within these limits, possibly showing an upward movement, commensurate to the DCF.
Over the next week, given the results of the DCF analysis and the consensus target of $160.96 from various analysts, we could possibly anticipate an upward trend.
Evaluation
Despite Amazon's high PE ratio, the company's strategic growth plans in AI-driven healthcare, combined with solid technical indicators, suggest potential for future growth and price appreciation.
Therefore, the stock could be considered as a Hold at current levels. Investors should continue observing AMZN's performance, especially the upcoming earnings announcement on August 3, 2023, which could impact the stock's valuation and future prospects.
