Amazon Stock Has Soared 976%, But It’s Just Getting Started

amazon stock
Credit:iStock.com/denphumi

Amazon Wants to Rule the Consumer Space

Traders should read what I’m about say because opportunities like the one I’m going to talk about don’t come around often.

My thoughts are on Amazon.com, Inc. (NASDAQ: AMZN), which retested and broke back above the physiological price threshold of $1,000 on Thursday.

The media has been going crazy over whether AMZN stock deserves to be priced at a staggering 254-times trailing earnings and 132-times its 2018 earnings.

Even the price/earnings to growth (PEG) ratio of five-times is hefty for any technology stock, as it means Amazon stock is trading at five-times its estimated five-year compound annual growth rate (CAGR) for earnings, which is high and brings back not-so-fond memories of the technology meltdown in 2000.

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Yet whether you support the excessive valuation or not, the reality is that the stock market and Wall Street loves Amazon, and that’s what counts at the end of the day.

Why the Chart of AMZN Stock Is Bullish

Take a look at the beautiful upward trend staged in Amazon stock chart since 2009.

amazon stock charts

Chart courtesy of StockCharts.com

The stock had numerous pauses along the way and broke higher in each case.

After trading at a tight base at around $300.00 from May 2014 to January 2015, AMZN made an impressive breakout on the chart and never looked back until it broke $1,000.

Now while the easy gains have been made, my technical view is that Amazon has much more to give as the company expands its online power into other markets.

Look at the current technical pattern setting up. Amazon stock chart corrected and subsequently surged in early 2016 and again in late 2016. In each circumstance, Amazon managed to recover and trend higher on the chart.

amzn price charts

Chart courtesy of StockCharts.com

You will notice a similar chart situation is occurring at this time. It readjusted lower after the initial move the record $1,083 on July 27 but has since been in rally mode with the move back above $1,000 after the bullish Double Bottom.

Also Read2 Charts Show Why Amazon is the Next Trillion-Dollar Company

If you believe in the pattern, it’s conceivable that Amazon stock could soon take out its July high and trend higher towards $1,100 and above.

While the technical picture is bullish, there still needs to be a catalyst to drive the buying in this stock.

Analyst Take: 

After what was a smart strategic move to acquire Whole Foods Market, Inc. (NASDAQ:WFM) and incorporate the stores in Amazon’s extensive retail network, the company is now seriously looking at other lucrative retail areas where it takes market share.

I’m pretty sure the retail sector is cognizant of Amazon encroaching on their space.

The next big thing from Amazon appears to be its interest in the multi-billion-dollar online pharmacy business, which is being examined.

Amazon just hired a general manager with experience in the online pharmacy market and is said to be looking at adding more expertise.

There’s no guarantee that Amazon will enter the highly competitive online pharmacy market but if I were a betting man, I wouldn’t be surprised given the huge potential of Amazon (NASDAQ: AMZN).