Amazon.com, Inc. (AMZN) — Despite mixed Q4 results and the negative impact of the stronger U.S. dollar on sales, this leading online retailer managed to grow revenues by 20% in 2015. Analysts expect that trend to continue with similar sales growth estimates for 2016 and 2017.
Analysts at S&P Capital IQ Equity Research also expect Amazon to continue to take market share from brick-and-mortar retailers and see continued growth in Amazon Web Services and Amazon Prime.
They forecast earnings will more than quadruple this year to $5.46 per share and then jump another 83% to $9.98 per share in 2017. Capital IQ rates AMZN stock a “Buy” with a 12-month price target of $685. This is based on 2.5 times its 2016 price-to-sales estimate, which its analysts note is an attractive discount to Amazon’s peer group.
Turning to the chart, AMZN stock topped in late December after hitting an all-time high of $696.44. Shares then fell with the broader market until mid-January before a show of strength late that month in which AMZN stock rallied to its bearish resistance line and 50-day moving average. But it failed to break its downtrend and fell to a low of $474 in early February.
A subsequent run from February to March was more successful, as the resistance line was broken in late February, followed by consolidation pattern. The consolidation broke to the upside following a buy signal from my proprietary internal indicator, the Collins-Bollinger Reversal (CBR), on March 21 at $555, which drove the breakout to a high of $603 last week.
However, volume has been light, so I expect a pullback to about $575. And that is where I suggest AMZN stock should be bought with a target of $680. If successful, the trade would provide a return of more than 18%.
