Ushering in the New Year, Amazon (NASDAQ:AMZN) is finally partying a bit like its 1999. But in 2020, is today’s price action a warning or a gift-wrapped delivery for AMZN stock investors? Let’s take a look at the evidence off and on the price chart to make a more informed decision.
Much to the delight of AMZN investors, 2019 didn’t present a December-to-remember like 2018’s ugly correction. The Amazon stock price muscled higher by 2.61% for the month. That’s a good deal different than last year’s 11% swoon. What’s more, the bullish action wasn’t without good cause.
AMZN stock’s December gains were spearheaded by record-breaking number of shipped packages over the Christmas selling season, the addition of 5 million new Prime members and/or trials immediately in front of the holiday and the near quadrupling of same-day and one-day Prime shipments. Nice, right? And so far 2020 has been a good one for AMZN stock with solid reasons as well.
Amazon stock is up about 2.50% in January as a new trading year gets underway. Amid the festive reveling, a couple analysts have bullishly chimed in. Baird’s Colin Sebastian recently made the case for AMZN stock trading at $2,080 by year-end. The firm cited continued secular e-commerce strength, relative weakness versus large-cap peers, improving margin optics and strong growth opportunities for Amazon’s commerce, logistics, advertising, cloud and payments units and international business.
More recently, Barron’s was spied defending AMZN stock as a “good investment” this past weekend. The weekly’s analysis centered on the company’s massive — and fast-growing — free cash flow. According to their calculations, Amazon is on track to become the world’s largest FCF generator and worth the price of admission notwithstanding the stock’s hefty 69x forward price multiple.
AMZN Stock Monthly Chart
Source: Charts by TradingView
Despite today’s proffered bullish evidence, don’t think Wall Street is treating Amazon like it’s 1999 and shares are doomed for some type of repeat bearish Dot.com performance. That would be a mistake.
As the monthly chart shows, AMZN stock enjoyed a solid 2019. But a comparison to the turn-of-the-century’s bubble is hardly similar. Additionally, as good as Amazon’s 23% climb in 2019 was, it woefully under-performed the 38% captured by the NASDAQ 100 index tracker Invesco QQQ Trust ETF (NASDAQ:QQQ). Amazon’s performance further trailed the monster gains enjoyed in large-cap tech peers Microsoft (NASDAQ:MSFT) and Apple (NASDAQ:AAPL). But now there are also more reasons to see 2020 as a year in which AMZN stock can continue to rally strongly.
The gains tracked by Amazon stock in December technically allowed shares to clear angular resistance tied to a potential bear flag pattern centered on the 62% retracement level of its 16-month-long corrective base. It’s bullish. Along with a cooperative stochastics setup, December’s combined win is solid evidence to buy Amazon shares today. What’s more, a purchase will likely prove a well-rewarded decision. Coupled with Amazon’s common, but much-needed and healthy correction, a breakout of the base should lead to significantly higher prices in 2020.
Bottom line: Don’t expect same-day or even one-day deliveries of immediate stock gratification. But a forecast conservative measured move to $2,500 in 2020 out of the corrective basing pattern is sure to put a smile on the faces of longer-term AMZN stockholders.
Disclosure: Investment accounts under Christopher Tyler’s management do not currently own positions in securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.