Amazon.Com (NASDAQ:AMZN) stock is on one of its periodic swoons. Shares that traded at nearly $2,050 at the start of September were being offered before trading opened Sept. 18 as low as $1,907. On the face of it, that seems cheap for Amazon stock.
Traders snapped up those bargains early in the session, but they were still down over 5% on the month.
The question becomes, is this a buying opportunity? Yes, Amazon stock is the most beautiful of all, with a glorious chart, and I’ve made a lot of money on it over the last five years. But it’s also in the political crosshairs, hated by Trump, tariffed by China, and with European regulators demanding Amazon produce 30% of the movies it shows in Europe in Europe.
I wrote back in July that Amazon was a bubble stock waiting to pop but it’s been one before. Back in 1999, before its cloud was a gleam in Jeff Bezos’ eye, the shares sold for $295. It took 10 years for the company to get back there.
Time to Sell?
Traders take every fall in Amazon stock as a reason to buy it. It’s easy to see why. Analysts expect it to earn $17.77 per share this year, $59.06 per share in 2021, with revenue of $234 billion this year and over $285 billion next year.
But those estimates, like all estimates, are based on trends remaining what they are. Amazon is now facing some of the same problems as Walmart (NYSE:WMT), low-level employees bitter about their pay and working conditions, high-level employees thinking they can steal from it with impunity.
Amazon is also due to become a big target in the trade war, with China’s government retaliating against tariffs by restricting sales to it.
Like the Apple (NASDAQ:AAPL) iPhone, Amazon’s Echo speakers are made by Foxconn (OTCMKTS:HNHPF) using a factory in Hengyang, China. So are its Kindle e-book readers.
These products are key to Amazon’s continued growth, because they bring the company’s products and services within easy reach of consumers. JonesTrading chief market strategist Michael O’Rourke, in Greenwich, Connecticut, recently sent a note to clients warning that China’s retaliation for the present tariffs could result in “scorched earth” economic warfare.
Time to Buy Amazon Stock?
In areas that are under its control, Amazon continues to hit on all cylinders. It is ready for political battle, not just because founder Jeff Bezos owns The Washington Post, but because it continues to need facilities outside its Seattle headquarters, starting with HQ2, now widely expected to go to the Washington D.C. area.
Amazon Prime Video won five Emmy awards this year and bundling video with Prime shipping means Amazon has the biggest audience in the U.S. streaming market. (Sorry, Netflix (NASDAQ:NFLX)
Even the stupid idea from a Citigroup (NYSE:C) analyst that Amazon be broken up, the Web Services unit spun out into a separate company, was seen as bullish for the stock. The idea is stupid because AWS was built on the cash flow of the rest of the business.
The Bottom Line
Whether you want to buy Amazon here depends on your time horizon.
Over the next month or so, Amazon is a buy on technical grounds, probably headed to new highs. Over a longer-term, five to ten years, Amazon is also a buy, one of the best-run companies in America, perhaps the world.
The trade war, and the likelihood of a market crash as the Federal Reserve continues to hike short-term interest rates, oil remains volatile, and political vulnerability remains acute, could make for some rocky times. There is a lot of irrational exuberance in the stock market right now, and Amazon stock is at the center of it.
Dana Blankenhorn is a financial and technology journalist. He is the author of a new mystery thriller, The Reluctant Detective Finds Her Family, available now at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or follow him on Twitter at @danablankenhorn. As of this writing he owned shares in AMZN.
