Optimism radiates among analysts as Amazon.com Inc. emerges as a prominent victor in this season’s earnings arena. The e-commerce and cloud-computing titan’s stock has surged by over 5% this month, contrasting with the decline witnessed by other tech giants such as Apple Inc., Microsoft Corp., Alphabet Inc., and Nvidia Corp.
Bolstered by reinvigorated profit and revenue expansion, Amazon’s shares have soared an impressive 67% in 2023, almost double the gains of Microsoft. After a period of trailing behind other mega-cap peers for the past couple of years, Amazon’s stock experienced a breakthrough in the second quarter, maintaining its upward trajectory. The surge can be attributed to the company’s diligent cost-cutting measures and indications of stabilization within its cloud business.
In the second quarter, hedge funds displayed an increased appetite for the e-commerce behemoth, with a notable 172 institutional investors bolstering their positions. On the flip side, 132 investors trimmed their stakes, as per data gleaned from 13F filings and compiled by Bloomberg. The buoyant outlook for the future of Amazon is underscored by the consensus anticipation of double-digit annual earnings growth over the coming years. This sentiment is substantiated by a more than 20% surge in the consensus forecast for 2024 net earnings of Amazon in the past half-year. Similarly, a projection of accelerated revenue growth holds sway, although the previous year observed the slowest expansion since Amazon’s inception as a publicly traded entity.
The spotlight turns to the pivotal question of sustainability. A critical juncture looms as some investors ponder the feasibility of Amazon’s continued gains amid telltale signs of a sluggish big tech rally. Rick Bensignor, the President of Bensignor Investment Strategies, underscores the necessity of a “real catalyst” to propel Amazon beyond its current plateau. He opines that the prevailing trading price, hovering around $140, does not present the opportune moment for further accumulation. The prospect of breaking the existing 52-week high of $144.78 is a prospective bullish harbinger, yet a cautious undertone emerges. Despite the positive narrative, the market appears to have already factored in much of the favorable news, rendering potential future gains elusive.
In the midst of these considerations, a prudent stance emerges for certain investors. The strategy involves withholding bets until a confirmed breakout transpires, potentially outweighing the perceived risks against prospective rewards. As the adage goes, time will unveil whether Amazon sustains its remarkable rally. However, the present landscape, shrouded in uncertainty, mandates a judicious examination of both the potential gains and risks entailed in investing in Amazon.
In this intricate tapestry of market dynamics, Amazon shines as a beacon of earnings triumph. Its unwavering surge amid the tumultuous tech climate emanates optimism, yet prudent caution remains the watchword for astute investors. As the saga unfolds, the extent of Amazon’s resilience and the mettle of its ascent will undoubtedly be subject to continuous scrutiny within the fluid contours of the market.
Source: Bloomberg
