FANG Stocks: Amazon (AMZN)
AMZN stock has also done well in 2017, up 14%. We all know about the decaying retail sector and Amazon’s ability to capitalize on that weakness. But judging the future of commerce can be difficult, especially with how quickly Amazon continues to move.
The biggest concern for Amazon skeptics has been earnings. Despite years of 20%-plus revenue growth, AMZN’s bottom line has hugged the flatline. Management argues that it’s investing in itself for even more growth and so far, investors have been patient. They’ve also been rewarded. Over the past 10 years, shares are up more than 2,000%. Thankfully, Amazon started to pad its bottom line with its Web Services cloud business.
While I personally love Amazon, I would be a bit leery of AMZN stock at these prices. Just last year we found out the hard way how fast things can change with sentiment. In the beginning of 2016, AMZN stock stumbled from $675 to sub-$500 in just five weeks. That 26% haircut startled plenty of investors, despite the stock rebounding to north of $800 a share within a year.
The lesson here is simple: Amazon shares are not invincible during pullbacks. Should we get a notable broader market correction, AMZN stock will not be spared. That is the best time to buy the stock. Now that it’s through the holiday season and continues to invest at a heavy pace, shares could struggle in the intermediate term.
A decline to its 200-day moving average would be a great place to initiate a long position. That mark is currently near $780 per share. Any further declines could be used to accumulate the stock.