Since hitting an all-time high in July, shares of Amazon.com Inc (NASDAQ: AMZN) have been struggling to find their feet. It had seemed at the time that the solid first half they’d had to the year was set to continue, but a wave of late summer volatility meant they went on to lose 25% of their value within a month.
The broader market managed to recover most of its losses through August, but Amazon’s bounce ran out of momentum well ahead of that. They might still be up 15% from last month’s lows, but they’re also down about the same from July’s peak.
The past week has seen them continue to consolidate in a narrowing range which is perhaps no bad thing after all the recent swings. For those of us on the sidelines it can also be a good time to consider if now’s the time to get involved. Afterall, there’s a strong argument to be made that Amazon is trading at an attractive discount right now. Let’s jump in and take a look.
Decent Fundamentals
Starting with the company’s fundamentals, last month’s earnings report delivered Amazon’s biggest revenue print outside of last Q4, which is always a bumper one due to seasonality. It was just below analyst expectations but still up more than 10% yearly. This miss was made up by the strong earnings print, with EPS landing a full 22% higher than what analysts were expecting.
The company’s forward guidance was a little softer than expected, but better-than-expected growth in Amazon’s core AWS unit helped to mitigate that. Still, its shares sold off hard in the aftermath, which coincided perfectly with one of the broader market’s worst weeks in recent years. The fact they’ve managed to all but undo that slide suggests there’s no real major damage done, and already the report has been digested.
Weighing Up The Outlook
So, what does that say about where the stock is trading today? Well, according to several key analysts, it’s way below fair value. Consider how many came out right after Amazon’s earnings, when its shares were in free fall, to call it a solid buy. The Piper Sandler team did just that when they reiterated their Overweight rating at the start of August and gave the stock a $215 price target.
JPMorgan Chase did the same, only with a $230 price target, while Barclays went even higher and gave Amazon a $235 price target. They all based their optimistic outlook on the strength of Amazon’s AWS unit, with JMP Securities noting that the wider migration of businesses from on-premise to cloud architecture is still very much in progress, meaning the AWS market still has a ton of room for growth.
This was something that the CEO of AWS, Matt Garman, spoke to on Monday, saying that only “maybe 15% to 20%” of enterprises have become cloud-enabled. The unit already has an incredible $105 billion run rate, but Garman called this “just the tip of the iceberg.” The growth in AWS should, in turn, underpin margin expansion through the rest of the year and into 2025, making Amazon an attractive option even if it wasn’t trading back at 2020 levels.
Getting Involved
We’ve already seen fund manager Cathie Woods, CEO of Ark Invest, reporting significant purchases in Amazon stock over recent weeks, and you can’t help but feel she might be onto something. Just last week, the teams at both Cantor Fitzgerald and JMP Securities reiterated their Outperform ratings on Amazon, with the latter giving them a refreshed price target of $265.
Considering Amazon closed at $175 on Monday night, that’s pointing to a targeted upside of more than 50%, which is not bad for a $1.8 trillion company. In terms of getting involved, investors should look for the stock to continue consolidating around current levels, with a run of higher lows indicating the bears have lost control to the bulls and the uptrend is back on track.
