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Amazon.com, Inc. (AMZN), headquartered in Seattle, Washington, is well-renowned worldwide as an online retailer. Valued at $1.87 trillion by market cap, the company sells consumer products, advertises, and offers subscription services through online and physical stores. The company’s Amazon Web Services (AWS) is the world’s largest cloud computing service provider.
Companies worth $200 billion or more are generally described as “mega-cap stocks,” and AMZN fits right into that category, reflecting its leadership in e-commerce and cloud computing. It is among the few publicly traded companies valued at over a trillion dollars, alongside Alphabet Inc. (GOOGL) and Apple Inc. (AAPL).
The tech giant has fallen 6.4% from its 52-week high of $191.70, which it hit on May 9. Shares of AMZN are up 3.2% over the past three months, underperforming the broader S&P 500 Index’s ($SPX) 4.5% gains over the same time frame.
Longer term, AMZN shares rose 43.4% over the past year, and in 2024, the stock is up 18.2%. By contrast, the SPX is up 11.3% on a YTD basis and 24.2% over the past 52 weeks.
To confirm the recent bearish price trend, AMZN has been trading below its 50-day moving average since late May. However, the stock has been trading above its 200-day moving average since mid-May 2023, indicating a long-term bullish trend.
On Apr. 30, AMZN shares fell more than 3% after the Q1 results were announced. Revenue rose 13% year-over-year to $143.31 billion, and net income came in at $10.43 billion or $0.98 per share, respectively, exceeding the consensus estimates of $142.50 billion and $0.84. However, the company’s revenue guidance for the current quarter of between $144 billion and $149 billion, fell short of analysts’ expectations of $150.07 billion, showcasing the challenge of a cautious business spending environment in cloud services.
AMZN’s overall outperformance can be attributed to its AI initiatives. The company has said that demand for its two AI chips, Trainium and Inferentia, has been strong due to their pricing and performance. Its offerings, SageMaker and Bedrock, have also been received positively by developers. AMZN also said that companies’ data center cost optimization initiatives are largely over, and the focus is now moving toward generative AI. In order to meet demand for generative AI, the company will procure and build new data centers, leading to better operating margins and free cash flow in the long run.
To emphasize the stock’s overall outperformance, Apple Inc. (AAPL) has underperformed - not just AMZN but also the S&P 500. AAPL stock has gained 8.7% in the past 52 weeks and is up only 1.3% on a YTD basis.
Despite its recent underperformance, analysts continue to remain optimistic about AMZN’s prospects. The stock has a consensus rating of “Strong Buy” from the 46 analysts covering it, and the mean price target of $221.09 is a 23.3% premium to current levels.
On the date of publication, Dipanjan Banchur did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
