Through the first eight months of the year, Amazon.com (NASDAQ:AMZN) may very well be the most impressive FANG stock, with Amazon stock up more than 63% so far this year.
We might not have thought that a few months ago when Netflix (NASDAQ:NFLX) was up 120% on the year. If anything, though, Amazon was a close second, particularly given the flat performance from Facebook (NASDAQ:FB) and the solid, but not triple-digit return of Alphabet (NASDAQ:GOOGL, NASDAQ:GOOG).
What makes Amazon stock so darn impressive is its size. Netflix may still be up 87% on the year, but its $155-billion market cap is a far cry from Amazon’s $930-billion valuation.
Heck, there was even a point where investors thought that despite starting the year with a market cap of $550 billion to Apple’s (NASDAQ:AAPL) almost $900-billion market cap, Amazon could hit $1 trillion before the iPhone maker.
That didn’t pan out, but the fact that it was even a discussion is impressive.
Sizing Up Amazon Stock
Hopping onto a $930-billion company that’s up more than 60% so far this year feels like a big overpay. I don’t think many investors would argue that, particularly when Amazon doesn’t make that much money — at least compared to the other behemoths, like Apple, Alphabet and Microsoft (NASDAQ:MSFT).
That fact really irks the bears, who have been pounding the table on valuation for a decade. That hasn’t slowed down CEO Jeff Bezos & Co. yet, so why should it now?
I hate jumping into a stock like this too late, so a pullback would be ideal. But as we enter the second half of the year amid a strong economic environment, it’s hard not to like Amazon. That’s evident by the earnings results we just saw from Target (NYSE:TGT), Walmart (NYSE:WMT) and a number of others. If they’re doing well, you know Amazon is too.
But Amazon has so many other growth avenues. There’s the obvious retail arm and the multi-billion cash cow that Prime has grown into. Don’t forget about the forgiving and patient investor base.
Finally, there’s the underappreciated advertising leg and the not-so-undervalued Amazon Web Services unit. We’ve seen strong cloud results from seemingly every player in the industry. I continue to argue that the cloud is in a period of resurgence, benefiting everyone from service providers to data-center REITs.
Given its leadership position in the cloud, I would expect growth to be strong for quite some time for Amazon.
Amazon Growth
How strong? Analysts expect earnings of more than $17 per share this year, up almost four-fold from last year’s earnings of $4.56 per share. Next year, they expect growth of 45%. On the sales front — something that’s always been more of a focus than profits — analysts expect impressive results. Amazon is forecast to grow sales 32% this year and 22% next year.
The above-20% revenue growth rate has been a key metric for Amazon stock investors.
Last quarter was strong, even though AMZN missed revenue estimates by more than $400 million. Investors were willing to overlook it, though.
Maybe it was the strength in its core businesses or the fact that earnings of $5.07 per share doubled expectations. It could be that sales still grew ~40% year-over-year or that in the prior quarter, revenue came in more than $1 billion ahead of estimates.
The end result? Growth is incredibly robust. Until it slows, Amazon stock will continue to grind higher.
Trading Amazon Stock
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The average analyst price target over the last 90 days is $2,122, implying more than 11% upside. The high target sits at $2,300, implying almost 21% upside from current levels.
Can it get there?
Amazon stock has pushed through short-term resistance near $1,925. So long as its strong-and-steady uptrend stays in place, it’s really hard to get bearish.
A test of channel resistance (purple line) should get Amazon over $2,000, while two strong uptrend levels should act as support. Coincidentally, those levels both come into play near the 50-day and 100-day moving averages.
I would be a buyer at both levels, and anything else is just noise. Keep it simple when it comes to Amazon stock.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell was long AAPL.
