Investors would have anticipated Amazon’s (NASDAQ: AMZN) stock to have performed better than its 4.3% return year-to-date return so far, especially when considering the firm’s position in e-commerce, cloud computing, and advertising.
AMZN is a part of the Internet & Direct Marketing Retail sector, which includes 81 other stocks, and although it outperforms 85% of them, it fell on Wednesday, closing at $3384 -$29.20 (0.86%).
The company has been trading within a relatively broad range of $3303.90 – $3559.88 during the past month. It is now trading amid this range, where prices have been stabilizing lately; this might be an opportunity for an entry point, although some resistance may exist above.
Indeed, AMZN does indicate a decent possibility for a profitable setup. Price consolidation has occurred recently, and volatility has been lessened as a result. Traders may test a support zone below the current price, around $3358.45.
Should investors be wary?
Nevertheless, the short-term trend is negative, as AMZN shares are trading below their 20-day simple moving averages (SMA), which is a bearish sign for those looking to purchase the stock. With that being said, the long-term trend is neutral as shares are trading above both their 50-day and 200-day SMA lines by a little more than 3% each.
While Amazon is now trading in the center of its 52-week range, the S&P 500 Index, on the other hand, is trading near new highs, indicating that Amazon is trailing behind the market.
Wall Street forecasts
To shed more light on the matter, 30 Wall Street analysts forecasted Amazon’s price for the next 12 months based on its performance in the last three months. Estimates range from $4,700 to $3,800, with the average price in the projection expected to increase by 21.97% from its previous level of $3,384 to $4,127.50.
Furthermore, based on the price projections of the 30 TipRanks experts’ stock recommendations for AMZN over the previous three months, all 30 advocate to ‘Buy,’ while none favor to ‘Hold,’ or to ‘Sell.’
Thus, based on their recommendations, the consensus rating for Amazon stock is a ‘Strong Buy,’ with a 21.97% upside.
AMZN top pick for 2022 as per leading analyst
Elsewhere, Baird analyst Colin Sebastian selected Amazon as one of his top picks for 2022, moving away from Google owner Alphabet (NASDAQ: GOOGL), which was his top pick in 2021, gaining 69% so far this year.
The analyst stated:
“We think that concerns over slower online retail growth and lower margins have largely run their course.”
“We believe sentiment will improve over the course of 2022, with enterprises rapidly shifting technology spend from on-premise overhead to cloud services, we think stronger AWS (Amazon Web Services) performance represents another likely catalyst during the year.”
Amazon planning future against competitors
Although Amazon’s stock price fell behind the S&P 500 index by 27.3%, history has shown that more significant returns generally follow when strong firms see their stock prices fall behind the market.
Due to the market’s attention being drawn to comparisons of year-over-year growth with the epidemic in 2020, Amazon’s most recent earnings reports seem to be lackluster. This year’s third-quarter sales increase was 15%, and the company intends to post top-line growth of between 4% and 12% for the year.
Consequently, the internet behemoth results are not in line with what investors have come to expect from the world’s largest e-commerce company. Nonetheless, investors looking five years down the road for Amazon and beyond will point out the firm’s strong cash position and how it is utilizing it to expand its competitive edge in the short term.
For the time being, AMZN is spending heavily on expanding its warehouse capacity and developing an unequaled global transportation fleet in order to gain better control over its supply chain. Likewise, Amazon has spent the past few years developing its own freight containers in order to avoid delays at California’s ports of entry.
This was a costly endeavor, but Amazon can afford it. Amid all of its expenditures, Amazon completed the third quarter with $79 billion in cash and short-term assets in its bank account and produced $26 billion in free cash flow.
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.