This week is one of the busiest of the quarter on Wall Street as the bulk of S&P 500 companies are revealing their third-quarter results. While the host of CNBC’s Mad Money, outspoken analyst Jim Cramer, advised investors to “sit on their hands” unless something huge happens between the U.S. and China, he also said now is a good time to buy Amazon (NASDAQ:AMZN). AMZN stock, he noted, is more than $250 away from its July highs above $2,000.
“You want to buy it when it’s in spend mode because then the stock gets depressed, which means you buy it now.” he said.
Is Amazon a good stock to buy now? Here’s a look at the case for Amazon stock.
AMZN Stock Is a Top Pick
Credit Suisse analyst Stephen Ju reiterated his “outperform” rating on AMZN stock earlier this week, pointing to the firm’s growing margins in the e-commerce space as well as the continued strength of Amazon’s cloud arm, Amazon Web Services (AWS). Ju also upped his price target on Amazon stock from $2,225 to $2,400.
Goldman Sachs’ Heath Terry also believes AMZN stock can deliver for investors, saying that the firm’s streaming service and cloud arm have become much more compelling parts of its growth outlook. Terry also pointed to recent physical store closings as further evidence that e-commerce is gaining momentum. He gave AMZN stock a “buy” rating with a $2,350 price target.
They’re not alone. According to the Wall Street Journal, of the 48 analysts covering AMZN stock, not a single one has a sell, or even a hold, rating on the shares. For once, it seems pretty much all of Wall Street agrees: AMZN is a buy at its current valuation.
So Why Isn’t Everyone Out Buying the Shares?
Perhaps the reason investors aren’t rushing out to buy Amazon stock is the market’s volatility. Traders appear to be waiting for an economic downturn to take hold and lead us into a market crash.
Many are worried about the ongoing trade tension between the U.S. and China. While both sides appear to be laying down their swords, investors are becoming increasingly suspicious of President Donald Trump’s rhetoric. Some worry that his optimism regarding a final deal is no more than bravado or even market manipulation.
Alex Kuptsikevich, a financial analyst at FxPro, says caution among investors could keep AMZN stock from making a big move. He believes traders are “more cautious about growth stocks” and prefer value stocks whose financial performance is more stable. He believes, “Amazon will need a strong report, better than analysts’ expectations” to boost Amazon stock price.
Earnings Could Impact Amazon Stock Price
Although Amazon isn’t expected to fare poorly, warnings about underwhelming marketwide Q3 results are likely keeping many investors on the sidelines.
Analysts, on average, predict that Amazon will report earnings per share of $4.59 on revenue of $68.8 billion. Due to report its results Thursday after the market closes, AMZN is expected to update investors on the progress of its new delivery and pickup options. AMZN is also expected to discuss its plans to open more physical stores.
While AMZN’s sales are likely to rise, its margins could take a hit as the firm continues to spend in order to fuel its future growth. Since poor margins tend to be a red flag in the retail space. Amazon stock price could retreat, creating the buying opportunity that Cramer referenced.
Under the Radar
Another possible explanation for the lack of interest in AMZN stock is the fact that the firm has flown under the radar in recent weeks. We’ve seen the retail sector pick up recently as Amazon’s competitors, including Walmart (NASDAQ:WMT), continue to expand their online offerings. The streaming space has also been front-and-center, but Netflix (NASDAQ:NFLX) and Disney (NYSE:DIS) have received the majority of the media coverage on the sector.
The Bottom Line on AMZN Stock
Amazon stock has been a solid growth play for the past few years. While this week is admittedly a risky time to be placing long-term bets, with the high volume of earnings reports, a great deal of economic data, and the possibility of a Trump tweet shaking up the market all looming. However, if you’ve been waiting to buy AMZN stock, now could be a perfect opportunity to do so.
As of this writing Laura Hoy was long AMZN and NFLX.
