There’s no other way to put it: Amazon.com, Inc. (NASDAQ:AMZN) is not having a great September. While it’s not going to matter much to long-term shareholders, after all, AMZN stock is up more than 25% year-to-date, the sudden volatility is a good reminder not to get too complacent. So far in September, shares are down 4.5%, which would make it the worst month this year.
Further raising eyebrows is the fact that the rest of the so-called “FANG” stocks also tripped up on Monday.
Facebook Inc (NASDAQ:FB) and Netflix, Inc. (NASDAQ:NFLX) averaged 4.6% losses, while Alphabet Inc (NASDAQ:GOOG,NASDAQ:GOOGL) gave up 1%. North Korea spooked the markets after the rogue state accused the U.S. of declaring war on them. However, the broader benchmarks ended relatively flat, suggesting other causes for the FANG volatility.
For the AMZN stock price in particular, it may just be that the bulls are getting tired. In late May, shares breached the $1,000 psychological barrier for the first time. Immediately afterwards, InvestorPlace feature writer James Brumley issued a warning.
After hitting such a critical milestone, Brumley argued that investors have nothing to “latch onto.” The subconscious “prodding” for AMZN stock to hit $1,000 no longer exists. Thus, shares really have nowhere else to go but down.
I agreed with the bulk of his argument, but not his conclusion. With $1,000 out of the way, the AMZN stock price now benefitted from the law of large numbers. That is, a move to $2,000 is now just a 100% move, something quite reasonable considering Amazon’s innovative dynamism.
For brief moments in July, I was right. But judging from the AMZN stock price today, I’m definitely wrong. The question is, will I continue to be wrong?
E-commerce is a Perpetual Bull Market for AMZN stock
Of course I’m biased, but I believe within a reasonable amount of time, Amazon will resume its remarkable rally. One of the reasons why I remain (perhaps stubbornly) bullish on the online retailer is its underlining industry.
Listen, we all know that “regular” retail is a mess. According to the U.S. Bureau of the Census, we’re witnessing flat growth in consumer sales excluding food services this year. Between January and August, total retail sales grew less than 0.3%. In contrast, the same period last year resulted in 2.4% growth. If America is great again, someone forgot to tell the retail sector.
But e-commerce is a completely different story. Between the first and second quarter of this year, internet-retail sales jumped nearly 5%. For the year-ago comparison, e-commerce gained 4.2%. While brick-and-mortar establishments, including the big names like Wal-Mart Stores Inc (NYSE:WMT) and Target Corporation (NYSE:TGT), developed their own online channels, no one does it better than Amazon. That’s as good of a reason as any to remain confident in the AMZN stock price.
Furthermore, Amazon isn’t just the world’s most powerful online retailer. Such a title, though wonderfully lofty, is commoditized. Theoretically, anyone with enough dollars could come in and start undercutting the company and eventually hurting AMZN stock.
But more and more, CEO Jeff Bezos is turning his organization into an experience. For example, with an Amazon Prime membership, you not only receive free shipping, you get a host of goodies including: video and ad-free music streaming, access to thousands of books and magazines, and even cloud storage for your social content.
You’re simply not going to get that kind of incentive anywhere else, which makes Amazon exponentially more difficult to defeat. I’d ignore the drama about the AMZN stock price today and focus instead on the future.
Amazon is as Hungry as Ever!
Technically as well, I’d avoid getting too emotional about Amazon shares. Brumley again is right. Traders have lost interest in the nearer-term. But this situation is unlikely to go on indefinitely.
Yes, a bearish head-and-shoulders formation hinders the AMZN stock price today. But throughout its history, we’ve seen the company form bearish trend channels. Each time, Amazon worked out its consolidation phase and leaped to higher levels. While history is not guaranteed to repeat itself, the risk of betting against Amazon is too steep.
Most stalwarts get lazy or complacent or arrogant. Not Amazon. This is a company that bought out Whole Foods Market, Inc. (NASDAQ:WFM) to further solidify its grocery ambitions. As a result, it killed the mainstays in that industry. If you don’t believe me, just look at Kroger Co (NYSE:KR).
Honestly, I can’t explain such dominance. But what I do know is that you don’t throw yourself against this freight train. I don’t like the term “too big to fail.” Nevertheless, if I had to use it, I’d apply it to Amazon. The company has become too ingrained in all aspects of our society to ignore. Therefore, I could care less about over analyzing the AMZN stock price today, or any day.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.
