On Friday, Amazon.com, Inc. (NASDAQ:AMZN) shares sank 1.4% thanks to a tweet rampage by President Donald Trump. More specifically, Trump went on Twitter Inc (NYSE:TWTR) and made the case that the United States Post Office, “which is losing many billions of dollars a year,” doesn’t charge Amazon enough. As a result, AMZN stock price dove lower, perhaps on fears that it will need to pay more in shipping in the future.
According to the president, USPS “should be charging MUCH MORE!” Of course, founder and CEO Jeff Bezos also owns the Washington Post, an outlet that Trump has criticized in the past as well. So perhaps it’s just a gripe against Amazon, but for at least a day, it’s weighing on AMZN’s stock price.
Unfortunately for the e-commerce giant, it’s going out on a somewhat disappointing note. Despite falling on the last trading day of 2017, Amazon had a rather superb year, with AMZN stock rallying 56%.
So should investors worry about a shipping cost increase thanks to the Oval Office?
Fundamentals for Amazon
Put simply, Amazon’s deal with the Post Office isn’t likely a major issue. Whether President Trump believes it’s a good deal or not won’t likely impact the current deal in place. It’s also unlikely to impact future negotiations. In short, the Trump/USPS news feels more like noise than anything else. I don’t think it will impact Amazon’s bottom line — especially with how much it will benefit from the tax plan.
While the new law will benefit companies like Apple Inc. (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT) and Alphabet Inc (NASDAQ:GOOGL, NASDAQ:GOOG), Amazon will be a big winner as well. According to the firm Blackledge, Amazon could boost its earnings per share by 24.2% in 2018. That’s just from the tax plan overhaul alone!
Prior to the tax-plan boost, analysts were already looking for hefty growth in Amazon. Currently, analysts expect revenue to grow 29% in 2018, down just slightly from the 30.3% growth forecast for this year. Analysts now expect earnings per share of $8.03 next year, up nicely from the $7.93 expected just 90 days ago. Further, it reflects 86% year-over-year (YoY) growth.
In a nutshell, Amazon’s core businesses remain very strong with robust sales growth. Thanks to its expanding e-commerce business and flourishing web services segment, profits are finally starting to materialize as well. Those profits will only increase thanks to the GOP tax bill from Washington. Those profits however, will not likely fall victim to higher shipping costs at the suggestion of the U.S. President.
Trading AMZN Stock Price
The chart is a pretty easy one to read. On Thursday, all was looking good and AMZN stock price was testing a run to all-time highs. On Friday though, that probability took a detour as shares went lower. Although not pictured in our chart, the AMZN stock price is now resting right on the 21-day moving average.
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Perhaps it will act as support this time, but I am not banking on it for now. Instead, there are two short-term levels of support AMZN stock may bounce at. Both $1,160 and $1,140 could buoy Amazon stock in the short term. Near these levels, the 50-day moving average could also play a role in providing support. This moving average is generally more significant than the 21-day.
Should these levels fail though, I would look for a drop down to about $1,090. After a brief “touch-and-go” in July, Amazon stock broke through this level in late-October. In early November, it fell and found support at it before turning higher.
Suffice to say, if a larger correction materializes, I expect this level to hold.
Amazon is a great company built on momentum. There seems to be little reason to doubt it lost any momentum this quarter and little reason to think that will change going forward. For investors that can tolerate the volatility and look past the valuation, AMZN stock is a no-brainer at the right level.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell did not hold a position in any of the aforementioned securities.
