At current $1,770 levels, Amazon (NASDAQ:AMZN) is a buy on the dip. In fact, it’s a buy on every dip. Granted, the stock was clobbered on a miss on the bottom line along with soft guidance. However, with the holiday shopping season rush nearing, AMZN stock is one to own now.
Sure, the company didn’t produce prime results. Earnings per share of $4.23 missed Street expectations for $4.62 a share. The company also disappointed with a fourth quarter guidance range of $80 billion to $85 billion, while expectations were at $87.4 billion. The problem with that guidance is that it raises eyebrows about the holiday shopping season.
Then again, sales as high as $85 billion are nothing to scoff at.
In addition, the company has made a habit of low-balling estimates on future earnings and revenues, as InvestorPlace contributor Dana Blankenhorn noted last week.
Meanwhile, Barclays analyst Ross Sandler says it’s “still early” to buy, telling clients: “The push to 1-Day is driving up costs and creating stress everywhere in the system from outbound shipping, forward inventory management, fulfillment and headcount, marketing, etc., all of which should persist into mid-2020.”
However, I believe a good deal of that is priced in. I also believe that with all of that accounted for, Amazon is a buy on fear. As even Baron Rothschild would say, “buy when there’s blood in the streets, even if the blood is your own.”
Amazon Still in its Prime and Loved by Analysts
SunTrust analyst Youseff Squali told clients, “Higher expenses/lower margins from faster shipping and Amazon Web Services investments further solidify AMZN’s competitive moat, in our view, and should lead to superior growth with higher margins over time.”
He also believes the soft guidance is conservative, and still views AMZN stock as “one of the most attractive stocks in our coverage universe.”
UBS still has a buy rating on the stock. Even Guggenheim says to use any pullback as a buying opportunity. JP Morgan analyst Doug Anmuth said: “We’ll take the trade-off of lighter profits for higher revenue—Amazon’s earned it. We’re buying the pullback.”
In addition, while Sandler says it’s “still early” to buy, Barclays still has a buy rating on the stock with a price target of $2,000.
Bottom Line on AMZN Stock
AMZN stock is a long-term winner that hit a temporary rough patch. I don’t believe it’s anything to be concerned with. Instead, we should focus on the long-term growth story here. For one, it appears investors once again overreacted to earnings news. As well, with sizable growth prospects and plenty of bullish analysts, it’s tough to argue for further downside.
With patience, I expect Amazon stock to resume its powerful uptrend, especially as we approach the holiday season, and as investors realize the pullback was overblown.
In short, use every dip in AMZN as an opportunity to buy more.
As of this writing, Ian Cooper did not hold a position in any of the aforementioned securities.
