Shares of Amazon.com, Inc. (NASDAQ:AMZN) have been on fire this year. The AMZN stock price is up 47% so far in 2017, a massive move for a now $532 billion company. For investors that have missed the move last week, there’s still a chance to get long this premier tech stock.
Why Buy AMZN Stock Now?
With shares up this big, some investors feel they’ve missed the move. That feeling is understandable. I wish I had just bought Amazon stock, Facebook Inc (NASDAQ:FB), Netflix, Inc. (NASDAQ:NFLX) and Tesla Inc (NASDAQ:TSLA) five or ten years ago and left it at that.
In any regard, there are a few catalysts left for Amazon despite this year’s massive move. For starters, the broad-based market rally has no end in sight. And I don’t say that as a blind bull.
In truth, I haven’t been bullish enough. I’ve spent too much time in cash (although it’s admittedly comforting) and have pared back my winners by too much — in names like Visa Inc (NYSE:V) and Mastercard Inc (NYSE:MA), specifically.
From the looks of it though, any blip in the market will be bought ferociously. Investors pounce on 1% and 2% pullbacks, thus the market has now set a record for the longest stretch without a 3% pullback. That goes for the SPDR S&P 500 ETF Trust (NYSEARCA:SPY) and SPDR Dow Jones Industrial Average ETF (NYSEARCA:DIA).
For market leaders like Amazon, investors are the same way. They want to be a part of the cloud and the commerce revolution. It helps that we’re coming into November. The holiday season should kickstart the buying appetite in the stock market, especially in an economy and market like this.
Heading into the season where Amazon, eBay Inc. (NASDAQ:EBAY) and others do a bulk of their business, why shouldn’t investors be excited about them?
The Quarter
Prior to reporting earnings in late-October, Amazon had been bumbling along, actually down 6.5% in the three months prior and up just 7% in the prior six months. Remarkably unimpressive gains for a stock that’s up almost 50% on the year. That shows us that AMZN stock has been consolidating for the better part of six months. That in itself is bullish, as it has a longer base to project higher from.
Even though expectations fell over the past 12 months, analysts were looking for earnings of just 3 cents per share going into the quarter. Amazon blew it away, reporting 52 cents per share. Sales of $43.74 billion came in $1.6 billion ahead of expectations and up 33.7% year-over-year. Its midpoint of fourth-quarter revenue guidance more or less hit analysts’ expectations.
As a quick note, this is really impressive sales growth for a $530 billion market cap company. But Alibaba Holding Group Ltd (NYSE:BABA) just reported 60% sales growth this quarter and has a $475 billion market cap. That’s one reason why we are long this name.
The lack of profit remains one concern. Last year’s $2.4 billion in net income was its best annual pull ever. In all honesty, that’s not that great. Apple Inc. (NASDAQ:AAPL) made $45 billion last year. Cut the market cap in half (so it’s closer to Amazon’s market cap) and we’re still looking at $22.5 billion in profit, some ten-fold what AMZN did.
Valuation has never mattered with Amazon and it won’t start now. But it’s important to note.
Trading Amazon Stock
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Buying at $1,080 might be a little early, but it will get us in the game with AMZN stock. There is a limited-risk play with a second, stronger level of support below.
If this level fails, investors can bail. Additionally, the purple trend line should come into play near this area. A pullback will give AMZN stock a chance to work off its overbought condition.
It’s been consolidating for a while now and a sustained “melt up” wouldn’t be surprising.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell held a position in BABA, V and MA.
