Amazon is the IBD Stock of the Day for Thursday, as Amazon stock builds on a breakout from a flat base. With a nearly 4% gain on Wednesday, Amazon stock reached a $2 trillion market cap for the first time in its history.
Helped by excitement about AI and growing profits, Amazon stock has gained 28% this year and 53.5% over the past 12 months. The breakout Wednesday pushed Amazon stock further beyond its previous July 2021 highs, underscoring the company's recovery from a slump in late 2021 and 2022.
On the stock market today, Amazon stock rose 2.2% to close at 197.85. Shares topped a 191.70 flat base buy point, according to IBD MarketSurge. The buy range goes to 201.29.
Amazon Stock: Path For More Retail Efficiencies
Amazon joined Apple, Microsoft, Nvidia and Google parent company Alphabet as the only companies with $2 trillion-plus market caps.
The gains Wednesday for Amazon stock followed a target price increase from analysts at Bank of America. The analysts raised their price target for Amazon stock to 220 from 210. They said they believe Amazon can continue improving the efficiency of its retail operations.
"Retail has been the big driver of recent estimate revisions (over Amazon Web Services), and with (first quarter) efficiencies exceeding expectations, we think Amazon is on a good path to drive more retail margin leverage upside in 2024," BofA Securities analyst Justin Post wrote Wednesday.
Further, Amazon was likely helped by Rivian stock surging following reports of Volkswagen's plan to take a stake in the electric-car maker. Amazon is Rivian's largest shareholder with a 16% stake, according to FactSet data.
Meanwhile, Amazon also is reportedly making moves to head off an emerging rival. The Information reported Wednesday that the e-commerce giant plans to launch a section of its website dedicated to low-cost items shipped directly from merchants in China. Citing slides shown to Chinese sellers, The Information reported that the service would ship orders in nine to 11 days to customers, rather than the two-day shipping Amazon is known for.
The strategy would mark Amazon's most direct response to discount seller Temu. Backed by China tech giant PDD Holdings, Temu has quickly grown in the U.S. by selling low cost items from Chinese merchants, with slower shipping times.
Amazon Q1 Results
Amazon stock gained nearly 11% in the weeks since its first-quarter earnings report on April 30.
For its quarter ending with March, Amazon reported a 216% year-over-year earnings increase, to 98 cents per share, with sales up 13% to $143.3 billion, exceeding analysts expectations.
Further, sales for Amazon Web Services grew 17% year over year to $25 billion in the quarter. That was better than consensus and eased some concerns about whether Amazon could reignite growth at its profit-driving AWS business.
There are still challenges ahead for Amazon, including an antitrust lawsuit by the Federal Trade Commission. Analysts are also debating how much Amazon's position will benefit from generative AI.
Amazon Stock On Leaderboard
Meanwhile, Amazon stock is on the IBD Leaderboard list. It was part of the Magnificent Seven stocks that powered S&P 500 gains last year.
The IBD Stock Checkup tool shows Amazon stock with a Relative Strength Rating of 92 out of a best-possible 99. The score indicates the stock has outperformed most of the market over the past 12 months.
Amazon stock also holds an IBD Composite Rating of 94 out of a best-possible 99. The score means AMZN stock tops 94% of all other stocks in terms of key performance metrics and technical strength.
A potential upcoming catalyst for Amazon stock is Prime Day, its discount shopping event for Prime members. Amazon announced this week that the event will run July 16 to July 17.
