Few large stocks have enjoyed such a long term run of outperformance as Amazon. Not only are shares up 24% this year, but they have enjoyed an even more impressive 524% gain the past five years.
The question now is…will the profit party continue?
That is what we will explore with this POWR Ratings Breakdown where we review the outlook for Amazon on 5 different measures of its attractiveness.
Buy & Hold Grade = B
This is based on a myriad of factors including the price action the past year where we see an above average +17.86% return for shares. What I find most impressive is how this return includes the nasty drop during the Q4 correction that had shares down over 30% from the highs. It is this bounce from bottom that helps produce a better result with the Trade Grade we discuss next.
Trade Grade = A
Shares are showing ample momentum of late bolstered by a shockingly good 50% earnings beat that put everyone on notice that the growth party at Amazon is not over. With that came a flurry of analyst estimate increases and target price changes. So for as much as shares are up already in past years, the fair value target is still 20% above current levels.
Industry Rank = B
The Internet group comes in as the 16th best industry out of 123 ranked in total. Because stocks often move as a pack, then you want to make sure the industry is not an albatross around its neck. Certainly not the case here as the group has resiliently bounced back from the overdone Q4 tech wreck.
Peer Grade = A
Within its group it is showing the 5th best ratings with only MELI, MTCH, IAC and SE ranked above it. And right after it is are the rest of its FANG brethren FB, NFLX and GOOG. So indeed it is one of the best stocks in a very attractive group.
POWR Rating = B (Buy)
Yes, it would be nice if AMZN was in the top rated A (Strong Buy) group. However, there is no shame in it being just a notch lower at B.
And let’s be honest with ourselves. There is little reason not to own these shares as they have shown tremendous innovation over the years to keep up exceptional growth that propels shares ever higher.
On a personal note, I bought my original shares of Amazon back in 2001 at $8.58. And at that time many investors believed that Amazon would never generate enough profit as it would always be in a margin battle with other online sellers. Yes, they had the last laugh on that one.
I continue to own shares because wherever technology goes…Amazon will be there. And wherever retail goes…Amazon will also be there. Add the two together and you understand why AMZN has a rightful place in most stock portfolios.
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Amazon.com, Inc. NASDAQ: AMZN shares were trading at $285.12 per share on Wednesday afternoon, up $1.72 (+0.61%). Year-to-date, has gained 14.59%, versus a % rise in the benchmark S&P 500 index during the same period.
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