A perfect storm of Donald Trump’s surprise election, encouraging jobs data and the usual holiday optimism on Wall Street have spurred stocks to new heights over the past two months. But Amazon.com, Inc. (NASDAQ:AMZN) stock has been conspicuous in its absence from the recent rally.
The S&P 500 and the Nasdaq have each risen more than 6% since Trump was elected. Amazon stock is up a mere 1.5%, and that’s all in the past week.
I think that post-New Year’s bump is only the beginning of a long overdue rally in Amazon stock. Here are three reasons why.
The Holidays Were Good to Amazon.com
The shift in consumer shopping from big-box stores to the web continued this holiday season, and no company benefits more from that shift than Amazon. Sales improved 11% over last year’s holiday season, and AMZN transactions accounted for a whopping 38% of all online sales — Best Buy Co Inc (NYSE:BBY) ranked second with 4%.
That bodes well for Amazon’s fourth-quarter sales, due for release on Jan. 26. After the company missed earnings by a wide margin in the third quarter, AMZN stock nosedived nearly 14% in three weeks. It has taken another six weeks for the stock to recover. Speaking of which …
Amazon Stock Just Broke Through a Big Technical Barrier
I tend to like stocks to prove themselves before I recommend them. To me, bottom-buying is little more than guess work. A week ago, Amazon stock was stuck in the mud. Now it’s proving itself again. AMZN just broke above its 50-day moving average for the first time since the late-October earnings miss, and was up nearly 40 points in two trading sessions.
Praise for Amazon’s Alexa presentation at this week’s Consumer Electronics Show in Las Vegas was one catalyst; beginning-of-the-year buying of slumping growth stocks appears to be another, as Facebook Inc (NASDAQ:FB), Netflix, Inc. (NASDAQ:NFLX) and Alphabet Inc (NASDAQ:GOOGL, NASDAQ:GOOG) (which combined with Amazon comprise the so-called “FANG” stocks) have all built up a full head of steam since the calendar flipped to 2017.
If AMZN beats earnings in two weeks, look for more bulls to swoop in and push the stock well into the $800s.
Drones, Groceries and Sports Apparel
What makes Amazon such a good company — and AMZN such a hard stock to keep down for long — is its diversification and wow factor. Jeff Bezos is never short on ideas for a new revenue stream, and the past few weeks have illustrated that.
In December, the company unveiled its first Amazon Go, a grocery store without cashiers or checkout lines; it made its first-ever (and long-promised) drone delivery, in England; and it hinted at plans to launch its own athleisure line, with the intent to compete with Lululemon Athletica inc. (NASDAQ:LULU).
And that was all before Alexa was reportedly the toast of last week’s Consumer Electronics Show, as both Ford Motor Company (NYSE:F) and Volkswagen AG (ADR) (OTCMKTS:VLKAY) announced plans to include the virtual voice assistant as part of their infotainment systems in new cars.
The Alexa-automakers partnership alone helped move the needle for Amazon stock this week, a sign that AMZN buyers are back. With no shortage of innovative catalysts on the horizon, look for the recent mini-rally in Amazon stock to pick up steam in the coming weeks and months.
Whether you’re a long-term investor or a trader looking to make a quick profit, I’d snatch up AMZN now.
As of this writing, Chris Fraley did not hold a position in any of the aforementioned securities.
