Amazon.com Inc. (AMZN) is a leading online retailer and one of the highest-grossing e-commerce aggregators. The company’s offerings also include Amazon Web Services’ cloud computing, storage, database, advertising services, and co-branded credit cards.
The company has been gaining on more Prime subscriptions, which were driven by the coronavirus-led spike in online orders. In addition, AMZN is seeing strong adoption of AWS through expanding its AWS services portfolio. The company is also benefiting from its devices strategy as Alexa powered Echo devices are selling well.
AMZN has a solid balance sheet with a current ratio of 1.1 and a debt-to-equity ratio of 0.8. Management is also highly efficient with a return on equity of 26%. In the most recent quarter, earnings soared 215% year over year and sales jumped 43.8%. Analysts forecast a 29.5% year over year rise in sales and 19.10% rise in earnings for the current quarter.
AMZN is overvalued with a trailing P/E of 66.32 and a forward P/E of 58.48. The stock has shown mixed performance since last July as shown in the chart below.
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Take a look at the 1-year chart of AMZN below with added notations:
AMZN has been trading in a large, sideways range for almost a year now. While in the range, the stock has formed a key resistance at $3350 (blue), and an area of support at around $2900 (red). AMZN looks like it’s headed back to $3350, and a break through it most likely means another big leg higher is underway.
AMZN is trading within a range. The possible long positions on the stock would be either on a pullback to $2900 or on a breakout above $3350. The ideal short opportunity would be on a break below $2900.
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AMZN shares fell $21.24 (-0.61%) in premarket trading Friday. Year-to-date, AMZN has gained 6.49%, versus a 12.17% rise in the benchmark S&P 500 index during the same period.
About the Author: Christian Tharp
I am an expert stock market coach having helped over 4000 beginner and advanced traders & investors from around the world take control of their financial futures. I also write stock market related articles for the Adam Mesh Trading Group and Yolo Publishing. More...
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