With shares of Amazon (NASDAQ:AMZN) trading around $274, is AMZN an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:
T = Trends for a Stock’s Movement
Amazon serves consumers through its retail websites and focus on selection, price, and convenience. The company also manufactures and sells Kindle devices. It offers programs that enable sellers to sell their products on its websites, their own branded websites, fulfill orders through them, and programs that allow authors, musicians, filmmakers, app developers, and others to publish and sell content. Online commerce has been on the rise because of the convenience, efficiency, and relatively low prices offered. Amazon is a leader in the Internet commerce space so look for them to continue to see rising profits, as consumers and companies opt for this method of shopping and selling over the standard method.
T = Technicals on the Stock Chart are Strong
Amazon stock has been on a path towards higher prices from a number of years now. The stock is consolidating near all-time high prices so it may need some time before it really gets going. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Amazon is trading above its rising key averages which signal neutral to bullish price action in the near-term.
(Source: Thinkorswim)
Taking a look at the implied volatility (red) and implied volatility skew levels of Amazon options may help determine if investors are bullish, neutral, or bearish.
| Implied Volatility (IV) | 30-Day IV Percentile | 90-Day IV Percentile | |
| Amazon Options | 29.05% | 83% | 82% |
What does this mean? This means that investors or traders are buying a very significant amount of call and put options contracts, as compared to the last 30 and 90 trading days.
| Put IV Skew | Call IV Skew | |
| July Options | Flat | Average |
| August Options | Flat | Average |
As of today, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a very significant amount of call and put option contracts and are leaning neutral to bullish over the next two months.
On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.
E = Earnings Are Mixed Quarter-Over-Quarter
Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on Amazon’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Amazon look like and more importantly, how did the markets like these numbers?
| 2013 Q1 | 2012 Q4 | 2012 Q3 | 2012 Q2 | |
| Earnings Growth (Y-O-Y) | -35.71% | -43.66% | -528.57% | -97.56% |
| Revenue Growth (Y-O-Y) | 21.88% | 22.01% | 26.94% | 29.47% |
| Earnings Reaction | -7.24% | 10 Best Clean Energy Stocks To Invest In Right Now4.76% | 6.87% | 7.86% |
Amazon has seen decreasing earnings and increasing revenue figures over the last four quarters. From these numbers, the markets have mostly been pleased with Amazon’s recent earnings announcements.
P = Excellent Relative Performance Versus Peers and Sector
How has Amazon stock done relative to its peers, eBay (NASDAQ:EBAY), Barnes & Noble (NYSE:BKS), Apple (NASDAQ:AAPL), and sector?
| Amazon | eBay | Barnes & Noble | Apple | Sector | |
| Year-to-Date Return | 9.53% | -0.60% | 22.33% | -21.24% | 7.55% |
Amazon has been a relative performance leader, year-to-date.
Conclusion
Amazon provides a platform that links consumers and companies large and small during a time where internet commerce is exploding worldwide. The stock has consistently seen higher prices over the last few years but is now consolidating so it may need time before it gets going. Over the last four quarters, earnings have decreased while revenue has increased which has maintained investors mostly pleased with the company. Relative to its peers and sector, Amazon has been a year-to-date performance leader. Look for Amazon to OUTPERFORM.
No comments:
Post a Comment