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AMZN Technical and Fundamental Analysis: Hold Recommendation, Strong Long-Term Potential

StockInvest.us, 1 month ago

Amazon Technical Analysis

Amazon.com, Inc. (Ticker: AMZN) closed at $183.54 on May 20, 2024, experiencing a minor decline of $1.16 (-0.63%). Price movement for the day ranged between $183.28 and $186.66, demonstrating noticeable intraday volatility against an ATR of 2.22. The stock has a defined support at $179 with immediate resistance at $183.62, aligning closely with the last closing price.

The RSI14 is marked at 67, which is on the higher side, suggesting near-overbought conditions but not reaching an overextended state. Meanwhile, the 50-day moving average at $181.41 supports the stock price marginally above its current level, while the 200-day moving average at $155.20 reflects a strong bullish long-term trend. The MACD (3-month) is positive at 1.99, indicating recent upwards momentum.

Volume analysis shows a daily trade volume of 30.36 million shares, below the average volume of 40.22 million, suggesting reduced trading activity and potentially signaling consolidation.

Fundamental Analysis

Amazon.com, Inc. (AMZN) presents a compelling fundamental picture with a market cap of $1.91 trillion. The company is set to declare its earnings next on August 1, 2024, with a current EPS of $3.58 and a P/E ratio of 51.27, reflecting high earnings multiple commonly associated with growth stocks.

The company's strategic initiatives, particularly its recent commitment to AI safety alongside other tech titans, cements its role as a leader in innovation. According to news reports, Amazon continues to generate significant free cash flow, affirming the robustness of its business model.

The discounted cash flow (DCF) valuation stands at $49.05, which suggests the stock is trading at a premium based on intrinsic value calculations. However, this discrepancy can be attributed to market expectations of substantial future growth.

Amazon Analyst sentiment remains overwhelmingly positive with a target price range between $84 and $270, a median target of $200, and a consensus price target of $187.44. Out of 43 analysts, only 3 suggest holding the stock, and none advise selling.

Next Trading Day and Upcoming Week Predictions

For the next trading day on May 21, 2024, AMZN is likely to test its immediate resistance at $183.62. Should it break through this level, short-term bullish momentum may drive the price towards recent highs. Conversely, breaching the support level at $179 could prompt a minor correction.

Over the upcoming week, the stock might experience moderate fluctuations around its current range due to technical resistance and overall market sentiment. Additional catalysts such as broader market movements and sector-specific news could further influence short-term performance.

Intrinsic Value and Long-Term Investment Potential

Amazon’s strong fundamentals, continuous innovation, and strategic positioning within burgeoning tech sectors such as AI underscore a substantial long-term potential. Despite the seemingly high P/E ratio, the company’s consistent revenue growth and ability to generate free cash flow provide a solid foundation for future value creation.

Intrinsic value calculations show a lower DCF valuation; however, this often diverges from market valuations for growth stocks given their future growth prospects. Investing in AMZN appears to offer a mix of steady returns driven by operational efficiencies and innovation-driven growth.

Overall Evaluation: Hold

Based on the analysis, AMZN appears to be a 'Hold' candidate. While the stock demonstrates strong technical and fundamental elements and significant long-term potential, its current near-overbought RSI level and premium valuation relative to DCF suggest potential for short-term volatility. A prudential approach would be to closely monitor upcoming earnings and market trends for a potential buying opportunity on pullbacks.

Check full Amazon forecast and analysis here.