Amazon.com is the IBD Stock of the Day as the e-commerce and cloud computing giant becomes actionable. Amazon stock has bounced off its 50-day moving average and 21-day line as investors eye a potential antitrust lawsuit by the Federal Trade Commission.
On the stock market today, Amazon gained 2.2% to close at 138.01 amid a distribution deal with Shopify. While there's some overlap in online merchants that use Amazon or Shopify, Amazon stands to gain new customers.
The company now offers its massive distribution network to merchants that do not sell goods on its website. The product fulfillment services are part of a program called Buy With Prime.
Further, it announced late Wednesday it will release an app giving Shopify's U.S. merchants access to the Amazon Buy with Prime service.
Amazon stock has advanced 64% thus far in 2023. Shares popped 10.6% on its second-quarter earnings report Aug. 3, then pulled back to the 50-day moving average by Aug. 25. The stock since has rebounded, making it actionable from its 21-day exponential moving average as well.
Possible FTC Lawsuit For Amazon
IBD research has found that with the biggest stock market winners, they tend to find support at the 21-day line after a breakout for at least several weeks.
Investors could choose to wait and see if AMZN stock forms a new base with 143.63 buy point. The recent consolidation of Amazon stock can be viewed as a handle to a yearlong base.
Meanwhile, the market seems to be shrugging off the possible FTC antitrust lawsuit for Amazon.
The FTC is looking at policies it believes force merchants to use Amazon logistics and advertising services. Worst case, the FTC could seek to break up the company.
But Amazon believes the company is in a good position to fight FTC challenges in court. The agency recently had a court loss versus Facebook-parent Meta Platforms. Further, Amazon has cut a deal with the European Commission to end an antitrust investigation.
Amazon Stock: AI Shakes Up Cloud Market
Meanwhile, the company's second-quarter earnings topped expectations.
The Seattle-based company earned 65 cents a share on sales of $134.4 billion in the June quarter. Analysts polled by FactSet had expected Amazon earnings of 35 cents a share on sales of $131.5 billion. In the year-earlier period, Amazon lost 20 cents a share on sales of $121.2 billion.
The company's cloud-computing unit, Amazon Web Services, saw its revenue increase 12% year over year to $22.1 billion. That was slower than the 16% growth in the first quarter, but topped estimates for 10% growth. Also, Amazon executives said AWS sales have stabilized.
For the current quarter ending in September, Amazon forecast operating income of $7 billion on sales of $140.5 billion. That's based on the midpoint of its outlook. Analysts had called for operating income of $5.5 billion on sales of $138.3 billion.
AI Threats To Amazon
While Amazon is the biggest cloud-computing service provider, the rise of generative artificial intelligence could give Microsoft, Google-parent Alphabet, Oracle or IBM an opportunity to gain share.
Generative AI can create content — including written articles, images, videos and music — from simple descriptive phrases. Artificial intelligence systems analyze and digest vast amounts of data to create new works. Generative AI also can write computer programming code.
Amazon is partnering with companies that build large language models that are at the heart of generative AI.
Amazon's e-commerce business also faces challenges as competition with Walmart heats up. Also, the profitability of Amazon's video streaming business remains a question for investors as Walt Disney and others struggle with content costs.
Amazon Stock: Technical Ratings
Meanwhile, shares hold an IBD Composite Rating of 91 out of a best possible 99, according to IBD Stock Checkup.
IBD's Composite Rating combines five separate proprietary ratings into one easy-to-use rating. Also, the best growth stocks have a Composite Rating of 90 or better. Its Relative Strength Rating is 89.
Amazon stock has an Accumulation/Distribution Rating of A-minus. That rating analyzes price and volume changes in a stock over the past 13 weeks of trading. Its current rating indicates more funds are buying than selling.
The rating, on an A+ to E scale, measures institutional buying and selling in a stock. A+ signifies heavy institutional buying; E means heavy selling. Think of the C grade as neutral.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
