Amazon (AMZN) hasn’t hung out with the broader market much in 2015, as evidenced by the fact that shares of AMZN stock are sitting on 65% gains so far this year while the S&P 500 is sitting in the red.
This week, though, Amazon stock kicked things off by following the general market’s strong gravity. The stock opened sharply lower on Monday, finishing the day with a 6% decline.
But despite the fact that panic seemed to be the only thing investors were feeling early in the week, the one-day drop was nothing more than short-term pain and a healthy consolidation of the year’s gains, as opposed to the early stages of a major pullback. This became evident quickly, with Amazon stock regaining its momentum after the Monday blues and posting a 14% rebound from Tuesday to Friday.
While the general market tide reversed during that time, a few catalysts were specific to AMZN stock. Let’s take a look at three reasons Monday’s blip was no big deal for the tech star.
Analyst Love for AMZN Stock: As soon as Amazon stock felt pain, analysts were quick to point out opportunity. Raymond James analyst Aaron Kessler, for example, raised his rating to “strong buy” in the wake of the stock’s pullback, noting that investors were handed “an attractive entry point” for his $640 price target — a target that remains 24% above the current price despite this week’s strength. Evercore also upgraded the stock to a “buy” on the same grounds.
More Innovation Out of Amazon Prime: One reason Amazon stock has been so popular this year (and in recent years) is because the company never sits still. It’s always innovating its core e-commerce business, and this week proved that hasn’t changed. Amazon expanded its Prime Now mobile app – which offers one-hour delivery for $7.99 and two-hour delivery for free to Prime customers in select areas – to offer beer, wine and liquor delivery, testing the feature in the Seattle area. That news coincided with Tuesday’s rebound — the end of the company’s five-day losing streak — and likely played at least a small role in investors’ restored confidence in AMZN stock.
A Smart(ish) Focus: Sometimes, though, less is more. And like any company pushing for innovation after innovation, some things are going to be flops. That’s life. Recognizing what’s working and what’s not is key for success, especially in the fast-paced and competitive tech world, which is why news of a failed innovation attempt also cheered investors up this week. Reports showed that Amazon is reducing the development of hardware such as smartphones, which is wise considering the difficulty of breaking into such a crowded space.
Put it all together and it’s clear that Monday’s pain was a big opportunity for gains. Investors who snagged shares during the pullback were smart to do so … but there’s also a darn good chance that AMZN stock still has more upside to come.
These recent bits of news are just the latest confirmation of the stock’s bullish tendencies and potential.
Hilary Kramer is the editor of GameChangers, Breakout Stocks Under $10, High Octane Trader, Absolute Capital Return and Value Authority. She is an accomplished investment specialist and market strategist with more than 25 years of experience in portfolio management, equity research, trading, and risk management. She has extensive expertise in global financial management, asset allocation, investment banking and private equity ventures, and is regularly sought after to provide her analysis on Bloomberg, CNBC, Fox Business Network and other media.
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