Amazon (NASDAQ: AMZN) is not a cheap stock, but there are indications it is undervalued. The company’s transition to CEO Andy Jassy resulted in significant traction and, more importantly, an expectation for wider margins that engage the market at all levels. What this means for investors is that once beaten down, Amazon stock is about to shine again. The Amazon market is deep into a reversal that, when completed, could easily take it back to all-time highs and potentially into new territory.
Amazon Gains Traction with Andy Jassy
Amazon has gained traction since appointing Andy Jassy to chair the board and run the company. He has sustained high single-digit to low double-digit growth during his tenure, and growth is outperforming the consensus estimates while accelerating in 2023. The last report shows North American sales up 11% despite the challenging environment and trailed by a 10% increase in the International segment. AWS, a jewel in the Amazon crown, is also growing at an 11% clip, accounting for more than 15% of the business.
The outlook for all three segments of the business is solid. Total eCommerce sales are expected to grow above 11% this holiday season to nearly double last year’s pace. Amazon is the clear winner in this category and will likely lead the market. The company plans a Prime Sales event in October that should result in solid gains. AWS should also see steady growth in the low double-digits, if not an acceleration, as it and its customers lean into AI. Regarding the consensus outlook? Analysts are raising their targets for Q3 and 2023 and see earnings doubling in 2024.
The Market For Amazon is Coming to a Boil
The market for Amazon stock is coming to a boil, with investors at all levels accumulating shares. On the retail end, the stock is the Fourth Most Followed stock on the Marketbeat.com platform, with 66 new followers in the last week, 280 over the last 30 days, and 610 since last quarter. That is compounded by its #3 spot on the Most Upgraded list, which shows a high level of analyst interaction.
The analysts’ data is especially telling. There are 49 analysts with current ratings on MarketBeat’s tracking page, which is a significantly high number. At that level, it can be assumed that the bulk of managed money is exposed to AMZN stock.
The analysts rate the stock a Moderate Buy, which has held steady over the last year while the price target corrected. The price target correction in the first half of 2023 helped the stock price to correct, and now the trend in consensus is leading the market higher. Analysts see AMZN moving up about 23% from $131.50, and the target is trending higher than last quarter, with most of the fresh targets closer to $$180.
Regarding the institutions, they bought in Q1 2023 when AMZN price hit a 3-year low, then sold in Q2 when they rebounded. Now, with shares on track to continue higher, they are buying on balance in Q3 to provide another tailwind for the market.
Amazon Has Bullish Technicals
Amazon’s technical outlook has softened over the past few weeks, setting up another buying opportunity. The minor correction that began in September may bring the market down to the $120 level or lower and trigger a buying event. A move to $120 coincides with the 150-day EMA and the 150-week EMA, which present a potential trigger point for the market. A move below the EMAs could fall as far as $110, where the stock would present an even greater value and opportunity.
Thomas Hughes
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