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The online retail giant gave Wall Street some cheer Thursday, posting third-quarter sales that jumped 34% to $43.7 billion. That would have beat analysts’ forecasts even without a $1.3 billion contribution from Whole Foods Market. Operating income, while down 40% year-over-year to $347 million, managed to beat the company’s rather downbeat forecast from the second quarter, the midpoint of which projected a loss of $50 million.

The key question moving forward is how long Amazon’s [stckqut]AMZN[/stckqut] current “investment mode” may last. Wall Street is betting on a sooner than later. Analysts expect record operating income of $6.5 billion next year compared with a projected $3.3 billion this year. But the company is absorbing the huge acquisition of Whole Foods as well as building on its future ambitions for grocery, devices, cloud and quite possibly other areas—such as pharmacies.

Those don’t come cheap. It is worth noting that Amazon’s free cash flow dipped into negative territory for the third quarter if one includes the payments made to cover its capital lease obligations. And now that Whole Foods is factored in, Amazon now employs more than half a million full-time employees. With investors hungry for more profits, that is a lot of mouths to feed.

Source: Amazon’s Profits Don’t Come Cheap – WSJ

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Company name Amazon.com, Inc.
Stock ticker AMZN
Live stock price [stckqut]AMZN[/stckqut]
P/E compared to competitors Fair

MANAGEMENT EXECUTION

Employee productivity Poor
Sales growth Good
EPS growth Good
P/E growth Poor
EBIT growth Good

ANALYSIS

Confident Investor Rating Fair
Target stock price (TWCA growth scenario) $1531.86
Target stock price (averages with growth) $1690.92
Target stock price (averages with no growth) $765.17
Target stock price (manual assumptions) $1529.6

 

The following company description is from Google Finance: http://www.google.com/finance?q=amzn

Amazon.com, Inc. offers a range of products and services through its Websites. The Company operates through three segments: North America, International and Amazon Web Services (AWS). The North America segment consists of retail sales of consumer products (including from sellers) and subscriptions through North America-focused Websites, such as www.amazon.com, www.amazon.ca and www.amazon.com.mx. The International segment primarily consists of retail sales of consumer products (including from sellers) and subscriptions through internationally-focused Websites, such as www.amazon.com.au, www.amazon.nl, www.amazon.es and www.amazon.co.uk. The AWS segment consists of sales of compute, storage, database, and other service offerings for start-ups, enterprises, government agencies and academic institutions. The Company’s products include merchandise and content that it purchases for resale from vendors and those offered by third-party sellers. It manufactures and sells electronic devices.

 

Confident Investor comments: At this time, I think that a Confident Investor can cautiously invest in Amazon.com, Inc. as long as the price is correct. Most of the fundamentals of this company are good but there are some concerns.

If you would like to understand how to evaluate companies like I do on this site, please read my book, The Confident Investor. You can review the best companies that I have found (and I probably invest my own money in most of these companies) in my Watch List.

How was this analysis of Amazon.com, Inc. calculated?

For owners of my book, “The Confident Investor” I offer the following analysis (you must be logged in to this site as a book owner in order to see the following analysis). If you have registered and cannot see the balance of this article, make sure you are logged in and refresh your browser.
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In order to assist you in using the techniques of this book, the values that I used when calculating the Manual pricing above were:

  • Stock price at the time of the calculation: $992.27
  • Growth: 0.2
  • Current EPS (TTM): $3.96
  • P/E: 250
  • Future EPS Calc: $9.85
  • Future Stock Price Calc: $2463.43
  • Target stock price: $1529.6

[/s2If]
I hope that this makes you a Confident Investor.

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Amazon.com Inc. [stckqut]AMZN[/stckqut] was the subject of two investor calls Thursday that raised concerns that it is getting too big.In one case, hedge-fund manager Douglas Kass said government intervention could be imminent.

“I am shorting Amazon today because I have learned that there are currently early discussions and due diligence being considered in the legislative chambers in Washington DC with regard to possible antitrust opposition to Amazon’s business practices, pricing strategy and expansion announcements already made (as well as being aimed at expansion strategies being considered in the future,” wrote Kass, head of Seabreeze Partners Management.

Kass bolstered his argument in a Thursday comment.

“My understanding is that certain Democrats in the Senate have instituted the very recent and preliminary investigation of Amazon’s possible adverse impact on competition,” he said. “But, in the Trump administration we also have a foe against Jeff Bezos, who not only runs Amazon but happens to own an editorially unfriendly (to President Trump) newspaper, The Washington Post.”

Source: Amazon is getting too big and the government is talking about it

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With all other things going on, Amazon.com, Inc. [stckqut]AMZN[/stckqut] has been on a run — rising 17.34 percent in just three months. It looks like traders are happy with the stock. On the other side, analysts now consider Amazon a buy, and a technical analysis of the stock is setting somewhat neutral outlook for now.

Let’s talk about the gap between analyst price targets for the next 12 months and Amazon’s current share price. Normally this spread should be in positive territory, indicating that analysts expect an investment’s value to increase over time.  The median target of analyst views collected by Yahoo Finance was as much as $99.22 below AMZN’s recent stock price. That’s the optimistic view from Wall Street.

The stock has actually made strong gains in the past year, as the company has gathered a 39.29% return in the past twelve months. But even with this move, there is still plenty of room for the company to come back from a longer term perspective, and especially if we look to recent lows for the company as well.

Finally, from a technical perspective, there’s a strong possibility that the stock could enter into a new bull market after finding strong support between $985.16 and $990.47. In terms of pullbacks, $999.87 level is the first resistance point. Technical analysis can help recognize key technical price levels in the stock. Investors can use these support and resistance levels to refine their entries and exits from stocks.

Amazon.com’s price is pointing towards neither exit nor entry barriers, according to the Relative Strength Index (RSI). RSI measures the speed and change of a stock price to warn investors when a stock’s momentum has carried it too far. An RSI reading above 80 indicates that a stock is overbought while anything below 20 is oversold.

The Stochastic %K for Amazon is 94.6. The stochastic oscillator is a momentum indicator comparing the closing price of a security to the range of its prices over a certain period of time. The sensitivity of the oscillator to market movements is reducible by adjusting that time period or by taking a moving average of the result. Considering the most traditional settings for the oscillator, 20 is typically considered the oversold threshold and 80 is considered the overbought threshold. However, the levels are adjustable to fit security characteristics and analytical needs. Readings above 80 indicate a security is trading near the top of its high-low range; readings below 20 indicate the security is trading near the bottom of its high-low range.

14-day Williams %R for Amazon moved to around 5.53. The interpretation of Williams %R is very similar to that of the stochastic oscillator, except that the stochastic oscillator has internal smoothing. The oscillator ranges from 0 to -100. No matter how fast a security advances or declines, Williams %R will always fluctuate within this range. Overbought and oversold levels can be used to identify unsustainable price extremes. Simply put, readings in the range of 80% to 100% indicate that the security is oversold while readings in the 0% to 20% range suggest it is overbought.

Source: Inspecting more closely technicals of Amazon.com, Inc. (AMZN)