E-commerce behemoth Amazon (NASDAQ: AMZN) reached a new 52-week low on May 10 as the rout of FAANG names continues. The basket of large-cap technology names, endearingly termed FAANG, are down by double-digit percentages in 2022, as tech investors are struggling to find shelter.
Amazon’s case is made worse because other players in the e-commerce sector have reported dull earnings. Shopify (NYSE: SHOP) was among the first to report bad earnings and the stock lost over 14% in a day, next in line were Etsy (NASDAQ: ETSY) and eBay (NASDAQ: EBAY).
Furthermore, unionization efforts, the rise of inflation, and the valuation contraction of most of the stocks have exacerbated the price issue Amazon has seen in 2022.
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AMZN valuation meltdown
The Covid pandemic has been kind to Amazon as the company has seen a massive surge of orders and even had to hire an additional workforce to keep up with the demand. Notably, the share price skyrocketed from under $1,700 in March 2020 to a high of $3,773.08 in the mid of 2021.
The selling pressure started in November with a few recoveries here and there but after a weak earnings report the company received its first sell rating. Worrying trends among consumers and the inability to compete, with the ‘inflated’ results shown during the pandemic days have had the shares repriced.
High sell volumes were noticed in May, pulling the share price even lower, there was an indication of a short moment of respite towards the close of the session on May 10. Shares are trading far below all daily Simple Moving Averages as the stock struggles to form new resistance lines.
Despite the challenges, the company is facing analysts deem the stock a strong buy, seeing the next 12 months’ average share price at $3,696. This prediction would see shares shoot up 69.76% from the current trading price of $2,177.18. Notably, the current trading price is below the bear case where analysts see the price being at $2,800 for the next 12 months.
Whether the shares are a buy at this moment in time is a question that can be answered by analyzing an investor’s risk appetite and investing strategy. Shares are trading at a 52-week low, which could represent a solid entry point, unfortunately, the company doesn’t pay dividends so price appreciation is the only selling point for the moment.
Macroeconomic trends may not improve that quickly; however, AMZN should benefit from the strong U.S. consumer; yet, it will pay to keep an eye on inflation when deciding to jump into the stock.
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.
