Why Investors Have Concerns About Amazon.com, Inc.
If you owned shares of Amazon.com, Inc. (NASDAQ:AMZN), April 28 wasn’t a great morning, after the mega-cap tech company stunned the market with weak first-quarter results and a warning about its second quarter.
But while Amazon.com, Inc. fell short of investors’ lofty expectations, the recent sell-off of AMZN stock wasn’t a signal to run to the exits, but simply an alert to be careful.
On April 29, Amazon stock went down by 14.6%, or $424.00 per share, to a 52-week low of $2,470. That essentially wiped out approximately $250.0 billion worth of Amazon.com, Inc.’s market cap.
The company’s massive net loss of $3.8 billion, or $7.56 per share, in the first quarter led many AMZN stockholders to head for the exits. (Source: “Amazon.com Announces First Quarter Results,” Amazon.com, Inc., April 28, 2022.)
Management blamed the earnings misfire on the company’s whopping pre-tax loss of $7.6 billion from its investment in the troubled electric vehicle start-up Rivian Automotive Inc (NASDAQ:RIVN). Amazon was also hurt by the return-to-the-workplace movement, which meant less demand for the home delivery of various goods.
The company’s revenues were flat in the first quarter, and to make matters worse, Amazon.com, Inc.’s revenue guidance for the second quarter was below the consensus estimate. This reality was disappointing to Wall Street, especially at a time when technology and growth stocks were being shunned.
Considering that Amazon stock is down by 24% over the past month, is it time for investors to load up on shares?
While the fundamental valuation is clearly more attractive following the sell-off, that doesn’t mean shares of Amazon.com, Inc. have become a bargain. AMZN stock still trades at a premium.
I’m now going to discuss Amazon stock in terms of its technical picture.
Long-Term Upward Trend for AMZN Stock
Tracing Amazon stock back 14 years, its sustained rally from about $87.00 during the March 2009 financial crash has been impressive, delivering a staggering return of close to 28,000% to investors.
The following chart shows AMZN stock testing the trend support on several occasions in 2015, 2020, and 2022. The stock managed to hold in the past but is struggling this time.
Chart courtesy of StockCharts.com
What to Expect From Amazon Stock in Near Term
Moving to Amazon.com, Inc.’s one-year stock chart, the shares are currently sitting around a minor support level. The risk is that, without buyers coming in, AMZN stock could further decline toward the next minor support level around $2,200.
Some investors might want to wait a while to see if Amazon stock will attract buying support at the current level or start falling to $2,200.
One concern for traders is that the $2,200 support level isn’t solid, so it could give way to the major support level of $2,000.
Chart courtesy of StockCharts.com
Investors who currently hold shares of Amazon.com, Inc. might want to add more of them to their portfolios while there’s price weakness—and then hold them for the long term. The company will likely continue to be a dominant player.
But investors who are new to AMZN stock might want to divide any investment in the stock into several tranches. They might want to start with a small position in Amazon stock to test the support and later add to that position on potential dips toward the range of $2,200 to $2,000.