Amazon (NASDAQ:AMZN) revolutionized the way the world functions. Consequently those who believed in AMZN stock decades ago received a giant reward for it. It is up 2,500% in about a decade, and it could break through $4,000 per share in 2022.
The win didn’t come easy for AMZN even though in hindsight it looks like it. The critics fought the Amazon way for a decade before they capitulated. Now every company wants to be Amazon, and it has become the second largest private employer in the world.
The thesis for being long AMZN stock remains the same as it was a decade ago. This is the ultimate growth company, which arguably never stopped being a startup. Under the leadership of Jeff Bezos they continually sought new revenue streams. This required them to constantly try new business ventures.
The most impactful one was the creation of the Amazon AWS. We all know it as the cloud and they out of nowhere owned it for a while. Now they have competition from major players like Alphabet (NASDAQ:GOOGL,NASDAQ:GOOG), and Microsoft (NASDAQ:MSFT). By the time they catch up, Amazon will probably be on to the next big thing.
AMZN Stock Is Still Bullish
Those who still doubt its success are clearly in denial because the proof is in print. The AMZN stock financial stats are phenomenal. Fundamental traders must give it an A+ on that front. In seven years they grew revenues more than five fold. Gross profit went from $26 billion to $190 billion per year. They went from losing money to having a net income of $26 billion this year. If that’s not impressive to the critics then they are lying to themselves.
Folks, it doesn’t get any better than this. Therefore, investing in Amazon’s future remains a valid bullish position. The starting point for investors may vary depending on their time frames. In the long run, small variations between spot a or b are not going to matter. However, I prefer to start green.
The next big move in AMZN stock will be once they break out from there 12 months range. This could happen early next year if the markets hold up. The decision to invest in Amazon is not an if but rather when. Of late I’ve had success trading the range using options. But the next opportunity is to be long into the super breakout from it.
The stock is expensive, so I would lean on options strategies for help. There investors can reduce out of pocket expense to set bullish trades in place. The long-term opportunity is clear, but the short-term spike is the exciting potential surprise scenario of 2022. Because once it snaps out of this long consolidation zone it will drop jaws. For that to happen AMZN needs the stock market to survive the jitters going into year end.
Investor Evolution Is Necessary
I caution long-term investors about not booking profits along the way. We have gone too long without a correction, so if one comes it might be deep. If the long consolidation stint breaks down instead of up, the move would also be big.
The old-school investment mantra has to evolve to be ready. Buy and hold forever is no longer easy and has developed too many short-term wrinkles. Technology and the speed with which information disseminates have accelerated the timeline drastically.
Therefore, all investors must act as traders sporadically, and this is one of those times. Great stocks are still a relative bargain, but they are at risk from sharp corrections. This threat becomes more severe as the Federal Reserve starts to tighten its monetary policy. We haven’t seen this scenario since 2018 and they caused a crash back then. Wall Street did not revert higher until the Fed restarted its QE program.
Caution is more than warranted at this point even in a bullish scenario like Amazon stock.
On the date of publication, Nicolas Chahine did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Nicolas Chahine is the managing director of SellSpreads.com.
