Amazon (NASDAQ:AMZN) is an excellent company that you should be pleased to own. It has recently been improving fundamentally, but recently the price has begun to pull back. Amazon, like its competitors pays its shareholder no dividend. The valuations appear to be on the decline as are the technicals.
AMZN continues to surprise Wall Street analysts by beating earnings estimates. Just a few examples: North American sales were about $7.4 billion, up to 36% from a year ago. International sales were about $5.8 billion, up to 32% from last year. Electronics and other general merchandise sales were about $ 8.0 billion, up to 43% from last year. Expenses for the quarter were also up about 36% to $13 billion. This data sparked a first-day jump in share price of about 14%. Checking a near-term chart of price movement proves the old adage of, "don't buy or sell on news!"
In late April, the price was about $190 and the price spiked to $234 on the news. It is currently selling for $213. I will never understand the American investor and how he or she goes about making investment decisions.
Amazon is by far the leading online retailer in the United States. The lower-income shopper prefers Amazon 's online convenience to Wal-mart's (NYSE:WMT) in-store experience.
About 60% of revenue comes from electronics sales, and about 36% from media sales.
Current Valuation for Amazon
Comments: These are not strong Valuations and Target Price Projections. The Valuation Divergence is negative. When I do further fundamental studies, the results neither improves nor declines. Projected earnings growth for AMZN indicates that it will be declining through 2015. My technicals are currently graded as, "good" as are my consensus opinions.
This suggests that AMZN will continue to follow the general market indices. (see the below 20 year chart).
Security's valuations should be updated and studied as frequently as possible. This work may or may not offer positive support or perhaps a negative warning! I do not recommend buying AMZN due my anticipation of a bearish technical cycle.
Plus 10+% / minus 20+% from the current price.
Forward P/E (fye 12/ date):
Price to Sales:
1.9 (a bit high)
Price to Book:
Return on Investment (R.O.I.)
4.9 % (NYSE:LOW)
(minus) - 20+% from current the price.
Source of raw data: Finviz.
Projected Price is calculated and produces a probable range of the current price over the coming one to three months. Fundamental Valuation and Technical Opinion is calculated and translated into a Rating. See the below Report Card. I often suggest cash and patience as an alternative.
Fundamental - weighting (40%)
Technical - weighting (35%)
Consensus Opinion - weighting (25%)
Report Card -Grade: ( 0 - 100 / A - F ) - (ascending / status quo / descending)
85 / B -- descending
88 / B+ -- status quo
82 / B- -- descending
My weighted Fundamental, Technical and Consensus Opinion ratings range from Excellent to Very Poor. Grades below 90 / A are not current (never are) candidates for buying. Grades above 60 / F are not current (never are) candidates for short selling. Information and data are ever changing, so be alert. Every company's "Grade" can be from a neutral grade (60 to 90 / D to B) to a buy (greater than 90) or short sale (less than 60) in a very short time.
Further support for the above notes can be read in my article on "My Rotation Model."
The catalogue and mail order industry is and has been very strong since early 2009. This fact is applicable, both fundamentally and on the charts. Amazon is technically in sync with its fundamentals and is in stride with its industry. Under normal circumstances this would be a positive remark. Looking at the above tables and the chart below tells us a potentially different story. My tables and charts make crystal-clear that holding shares of AMZN has been very profitable. And ownership in EBAY and LINTA, more recently has also been good. The question that is unanswered is, do you buy, sell or hold?
My criterion for taking a bullish position is that the company must have the prospect within its fundamental valuation and technical chart to outperform the general market, its sector, and industry group.
The general market is currently fundamentally overvalued and technically overbought, and its consensus opinion is much too bullish. It is showing signs of serious deterioration, especially in the area of breadth. This means that you must consider holding cash or perhaps take bearish positions in the coming weeks.
My analytic focus is investing wisely, e.g. taking advantage of the bull / bear cycles as they occur within the overall marketplace. Integrating conservative fundamental analytics within these technical cycles means maintaining a process of the thorough and on-going analytics of many companies, sectors and industry groups.
I suggest that you take a long look at this 20-year chart. Having a longer-term perspective of a possible future investment will always give you a more consistent bottom line. Comparing the SPDR, S&P 500 ETF (NYSEARCA:SPY) tells a very compelling story about AMZN.
Despite AMZN being the stronger company, I expect both AMZN and its peers to be under moderate pressure in the coming weeks and perhaps longer. For a resumption of an up-trend, we just may have to wait awhile. AMZN is definitely a company on my future buy list. The comparison of these three companies should make a strong statement of why I stress doing your homework well.
I recommend taking a few minutes to study my 20-year chart. When buying or selling, taking a longer-term view of a security's price history is very important.
This is a warning about buying or holding Amazon.
I am bearish on both the economy and the general market. My more recent postings are focused on securities that should not be currently held in your portfolio. It is important for you to understand that holding cash during questionable time frames is a wise choice. (This is definitely a "questionable" time frame).
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.