Amazon.com, Inc. (AMZN) has grown from a fledgling online bookseller to one of the largest and most valuable corporations in the world. The company is continuing to chart a path to retail-market domination and has benefited immensely from its recent investments in logistics and distribution to meet increased COVID-19-related shopping-from-home demand.
The pandemic has lit a fire under AMZN stock because of the company’s ability to meet an increasing demand for online shopping and remote working with the help of cloud-based services. Moreover, with a new, more contagious, COVID-19 strain necessitating renewed lockdowns in some major economies, AMZN’s sales should skyrocket in the coming months. The company is now investing heavily to grow its fulfilment capacity, which could further strengthen its long-term competitive advantage.
AMZN’ robust business strategy, expanding operations, and innovations have helped the stock gain 65.8% over the past year. This impressive performance, combined with several other factors, has helped AMZN earn a “Buy” rating in our proprietary rating system.
Here is how our proprietary POWR Ratings system evaluates AMZN:
Trade Grade: A
AMZN is currently trading higher than its 200-day moving average of $2,896.89, which indicates an uptrend. However, the stock has gained only 5.4% over the past six months, which does not indicate extreme bullishness.
The company’s financials look impressive, however. For the fiscal third quarter ended September 30, 2020, AMZN’s revenue has increased 37% year-over-year to $96.14 billion. Operating income has increased 93.8% from the year-ago value to $6.19 billion, while its EPS rose 193% from the prior-year quarter to $12.63.
On January 5, AMZN announced the purchase of 11 aircraft from Delta Air Lines and WestJet Airlines to join the Amazon Air cargo network in 2021 and 2022. This should support the company’s growing customer base at a time when people continue to rely on remote shopping and fast delivery.
AMZN announced plans to open its first fulfillment center in the state of Louisiana in December. This will create more than 500 new, full-time jobs. The expansion should boost the company’s cash balance substantially.
Buy & Hold Grade: B
In terms of proximity to its 52-week high, which is a key factor that our Buy & Hold Grade considers, AMZN is well positioned. The stock is currently trading 11% below its 52-week high of $3552.25, which it hit on September 2.
The company’s net revenue has grown at a CAGR of 29.3% over the past three years, while its new income increased at a CAGR of 108.2% over this period. AMZN’s EPS has increased at a CAGR of 105.8% over the past three years. This can be attributed to the innovative developments, rapid expansions made by the company, and a surge in order volumes during the pandemic.
Peer Grade: C
AMZN is currently ranked #16 of 69 stocks in the Internet industry. Other popular stocks in this industry are Snap Inc. (SNAP) Twitter, Inc. (TWTR) and Alphabet Inc. (GOOGL)
While SNAP beat AMZN by gaining 207.9% over the past year, TWTR and GOOGL returned 60.8% and 28.3%, respectively, over this period.
Industry Rank: B
The Internet industry is ranked #35 the 123 StockNews.com industries. Companies in this industry are engaged in numerous online businesses, including cloud services, content, auction exchanges, e-commerce sales, and advertising sales.
The use of internet infrastructure has been experiencing exponential growth amid the COVID-19 pandemic. The spike in e-commerce sales came largely from consumer spending. The coronavirus pandemic caused widespread store closures and drove stay-at-home shopping. Moreover, the cloud computing platform has also been witnessing a surge in demand due to the accelerated pace of digital transformation adopted by businesses worldwide.
Overall POWR Rating: B (Buy)
AMZN is rated “Buy” due to its impressive financials, uptrend in price, and underlying industry strength as determined by the four components of our overall POWR Rating.
AMZN is well positioned to outperform in the coming months despite gaining 65.8% over the past year. The company’s sales have gone through the roof and the company has made all the right moves in catering to the outsized demand.
Analyst sentiment, which gives a good sense of a stock’s future price movement, is good for AMZN. It has an average broker rating of 1.35, indicating favorable analyst sentiment. Of 46 Wall Street analysts that rated the stock, 18 rated it a “Strong Buy.”
The consensus EPS estimate of $9.22 for the quarter ending March 31, 2021 represents an 84% improvement year-over-year. Moreover, AMZN has an impressive earnings surprise history, with it beating consensus EPS estimates in three out of the trailing four quarters. The consensus revenue estimate of $95.31 billion for the next quarter represents a 26.3% increase from the same period last year. This outlook, we think, should keep AMZN’s price momentum alive.
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TME shares were trading at $20.62 per share on Friday morning, up $0.02 (+0.10%). Year-to-date, TME has gained 7.17%, versus a 1.67% rise in the benchmark S&P 500 index during the same period.
About the Author: Imon Ghosh
Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization. More…
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