Has the market gotten ahead of itself? Depending on where investors look, there’s definitely room for debate. But not so for mega-cap Amazon (NASDAQ:AMZN). Following a recent earnings release, Amazon stock looks like it has only just begun to flex its muscle. Let me explain.
On Wall Street today, Elon Musk’s Tesla (NASDAQ:TSLA), Richard Branson’s Virgin Galactic (NYSE:SPCE) or maybe Tim Cook’s Apple (NASDAQ:AAPL) are Wall Street’s stocks for weighing if the market has gone too far and far too quickly. It’s a polarized investing climate to say the least. But Amazon stock is a very different story, favoring higher prices right now.
On the heels of Amazon’s recent fourth-quarter earnings release, the company and its shares are firing on all cylinders. Off the price chart the diversified tech giant posted a rebound in net income despite rising costs and toppled Street profit estimates by more than 60% on earnings of $6.47 per share. That’s far from shabby to say the least. It’s also not all Amazon delivered either.
Sales were similarly pleasing as Amazon announced stronger-than-forecast revenue growth of 21%. The results were spearheaded by a solid 32% increase in subscription businesses such as Prime, a 34% jump from Amazon Web Services unit and 41% from its ‘other’ advertising business.
Finally, Amazon also offered upbeat guidance for the first quarter.
The one blemish is the company doesn’t have “any visibility” on the coronavirus’ impact. Bottom line, though, investors had a lot to act enthusiastically about. And that still unequivocally includes the price chart.
Amazon Stock Monthly Price Chart
Source: Charts by TradingView
If there had been any questions regarding Amazon’s underperformance over the past year, those concerns were put to rest in the aftermath of the company’s earnings report. With the post-earnings follow-through in Amazon stock, shares are roughly 5.5% above what all investors should uniformly label a breakout from a 17-month corrective base. It’s bullish. And with the monthly view showing an opening up of the Bollinger Bands and the stochastics trending higher inside neutral territory, shares are still in a buyable position.
Conservatively, I’d put a price target of $2,450-$2,500 on Amazon stock over the course of 2020. The estimate simply, but importantly, looks at the size and length of the base in coming up with an eyeballed price determination. So while other high-profile stocks might be due for their own time in the penalty box, when it comes to Amazon, shares are offering an attractive risk-adjusted opportunity for bullish investors.
Amazon Stock Strategy: Buy Amazon stock today. Look to take initial profits as shares challenge our price zone detailed above. Likewise, I’d exit the position using an initial stop-loss beneath $1,970. This contains risk to less than 5% while also giving the tech giant enough leeway on the price chart without marrying a position if shares take an unexpected turn for the worse.
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.
