Can Amazon Continue Its Bull Run?

With shares of Amazon (NASDAQ:AMZN) trading around $256, 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:

C = Catalyst for a Stock’s Movement

Amazon serves global consumers through its retail websites and focus on selection, price, and convenience. The company has executed a brilliant business model over the last decade that has earned it significant profits. As online shopping continues to rise, look for Amazon to be one of the key companies that capitalize on this movement.

The stock market is at 5-year highs! Discover the best stocks to buy in today’s market. CLICK HERE for Your Stock Investor Cheat Sheet NOW!

T = Technicals on the Stock Chart are Mixed

Amazon is one of the few technology names that is trading above highs established during the technology boom. It was also one of the most resilient stocks during the 2008 financial crisis. The stock has been a part of a beautiful uptrend that extends back almost a decade. Simple moving averages can provide insight into the trend and strength of the trend. What are the key moving averages? The 50-day, 100-day, and 200-day simple moving averages. Amazon is currently trading around its key averages, which may be signaling a pause in its run for now.

A relatively simple way to gain perspective into investor sentiment is through the use of the options market. More specifically, taking a look at the implied volatility and implied volatility skew levels of Amazon options may help determine if investors are bullish, neutral, or bearish. The implied volatility of Amazon options is at 29.04 percent today, which coincides with a 46th percentile over the last 30 trading days and 35th percentile over the last 90 trading days. What does this mean? This means that investors or traders are buying a good amount of call and put options contracts, as compared to the last 30 and 90 trading days.

The implied volatility skew of April and May put options is steep while call option skew is average. So as of today, there is an average demand from call buyers and sellers and high demand from put buyers or low demand by put sellers, all neutral to bearish over the next two months. Investors are buying a good amount of call and put option contracts and are leaning neutral to bearish over the next two months.

The stock market is at 5-year highs! Discover the best stocks to buy in today’s market. CLICK HERE for Your Stock Investor Cheat Sheet NOW!

E = Earnings Are Increasing Quarter-Over-Quarter

Increasing earnings and revenue growth rates are strongly correlated with increasing stock prices. The last four quarterly earnings growth (Y-O-Y) rates for Amazon have been -42.11, 123, -97.56, and -36.36 percent while the last four revenue growth (Y-O-Y) rates have all been: 22.01, 26.94, 29.47, and 33.76 percent. Amazon has displayed great revenue growth rates but decreasing earnings growth rates over the last four quarters.

The last four quarterly earnings announcement reactions help gauge investor sentiment on Amazon’s stock. The last four quarters have seen next trading session returns of 4.76, 6.87, 7.86, and 15.74 percent. Investors have been very excited about Amazon’s earnings reports.

E = Average Relative Performance Versus Peers and Sector

Amazon has been a leader but how has the stock done relative to its peers and sector? Year-to-date, the stock is returning -0.49 percent while its competitors, CafePress (NASDAQ:PRSS), eBay (NASDAQ:EBAY), Overstock (NASDAQ:OSTK), and sector are returning 4.63, -4.24, -15.89, and 10 percent respectively. Amazon has been an average performer year-to-date.

The stock market is at 5-year highs! Discover the best stocks to buy in today’s market. CLICK HERE for Your Stock Investor Cheat Sheet NOW!

Conclusion

Amazon is a company that continues to revolutionize the retail industry. The stock has been on a monster run over the years on excellent earnings and revenue growth rates. The company’s stock is flat for the year so it is doing about average relative to its peers and sector. WAIT AND SEE what Amazon does in the coming quarter.

Using a solid investing framework such as this can help improve your stock-picking skills. Don’t waste another minute — click here and get our CHEAT SHEET stock picks now.

More Articles About:   , , ,  

More from The Cheat Sheet