Sign InAmazon's Strong Fundamentals Point to Potential Growth Amid Mixed Sentiment
Summary
Amazon.com, Inc. has experienced significant growth and has a healthy financial situation, with a high price-to-earnings ratio indicating investors expect high future earnings growth, and a consensus among analysts that the stock is a 'Buy,' suggesting solid confidence in the company's growth potential; however, there are potential headwinds from a potential lawsuit from the Federal Trade Commission and morale issues in Amazon's device unit. (September 19, 2023)
Fundamental Analysis
Amazon.com, Inc. (NASDAQ: AMZN) has seen significant growth in the past, with a market cap hitting $1.44 trillion. The company has reported an earnings per share (EPS) of $1.22, which may reflect positively on investor returns and indicates a healthy financial situation. The price-to-earnings ratio (PE) of 114.74 is quite high, suggesting that investors are expecting high future earnings growth from Amazon.
There's a prevalent consensus among analysts that Amazon is a 'Buy', with 37 analysts favoring a buy and only 3 opting for a hold. The target consensus sits at $166.13, while the target high is a substantial $270, indicating solid confidence in the company's growth potential. There's a wide gap between the year's lowest and highest shares prices, at $81.43 and $145.86, respectively, which illustrates the elastic price performance over the year.
A vital consideration is Amazon's upcoming earnings announcement on October 25, 2023. This event could be a pivotal moment for investors, depending on the financials disclosed.
Technical Analysis
The relative strength index (RSI14) stands at 63, which indicates that the stock is neither overbought nor oversold. The 50-day moving average (MA), at $134.90, is lower than the last close price of $139.98, suggesting upward momentum in the stock. The 200-day MA at $111.20 is also much lower than the current price, further indicating a bullish sentiment in the medium term. The Moving Average Convergence Divergence (MACD) is at 0.66, suggesting positive momentum in the stock.
The next significant resistance level is $140.39, while the key support level is at $139.57. If the stock can break through the resistance, it could trigger additional buying interest and drive the stock price higher. Conversely, if the stock falls below the support level, it could trigger a sell-off.
The discounted cash flow (DCF) figure stands at $145.27, suggesting that the stock could be undervalued.
News Sentiments
News sentiment surrounding Amazon is mixed. A potential lawsuit from the Federal Trade Commission (FTC) and morale waning in Amazon's device unit could unsettle investors. However, the outlook is not all gloomy - Amazon is reported to be considering new subscription programs in the grocery and healthcare industry. This could significantly diversify their revenue streams if implemented successfully. The ongoing competition with Walmart, especially during shopping events, consistently keeps Amazon in the consumer's focus.
Predictions for the Upcoming Trading Day and Week
The stock may open near its last close, at $139.98, on September 19, 2023. Due to the mixed news sentiment and upcoming earnings announcement, investors may adopt a wait-and-see strategy, possibly leading to some fluctuations in the share price over the week. However, a strong technical momentum could help maintain a positive trajectory.
Evaluation
Given Amazon's solid fundamentals and current bullish technical outlook, the stock seems to be in a strong position. Due to the potential headwinds from the FTC lawsuit and news around employee morale, it would be prudent to keep a close eye on these developments. The expectation of an upswing based on the DCF, technical attributes, and overall analyst consensus corresponds with the 'Buy' sentiment. However, individual investor decisions should consider overall portfolio construction, risk tolerance, and investment horizon.
