Amazon.com (AMZN) is the IBD Stock Of The Day, closing in on a buy opportunity that follows an eight-month base while gearing up for its largest shopping event of the year.
The buy point of 1,964.50 will kick in if Amazon stock breaks out past that entry in a long cup-with-handle base that began forming in September.
The handle is already long enough to be considered its own base. It could be interpreted as a cup base. The buy point would be the same. A pullback over the past few days may offer an alternative entry at 1,935.30, especially if Amazon ends down for the week. Either way, if Amazon stock can break out, it should come in volume at least 40% higher than normal.
Amazon stock climbed 1% to close at 1,897.83 on the stock market today.
Amazon stock is holding above its 50-day moving average. But its relative strength line has gone sideways for several months and is not showing signs of strength. The RS line compares a stock's price action to that of the S&P 500. A rising line tells you the growth stock is outperforming the benchmark index.
Amazon Stock Correction
The stock underwent a 36% correction during its base formation, from the left-side high to the bottom of the base. That's on the steep side, but trading has smoothed out in the past few months.
Amazon is on the exclusive IBD Leaderboard list of top-performing stocks near a buy point and is also on the IBD Big Cap 20 screen.
Among potential catalysts for the stock is its upcoming Prime Day event. It's the biggest and most highly promoted sales event of the year for the e-commerce giant. On Tuesday, Amazon announced that Prime Day, which initially was a 24-hour event, will take up two full days. It's scheduled for July 15-16.
Something to be aware of is that Amazon's revenue growth is slowing.
Even with its massive size, with revenue of $233 billion last year, Amazon has maintained its double-digit revenue growth for years. Revenue in the first quarter rose 17% to $59.7 billion, but it was the smallest gain in four years and the fourth straight quarter of decelerating growth. For its second quarter, Amazon expects net sales in the range of $59.5 billion to $63.5 billion, which amounts to growth of 13% to 20%.
On the positive side, Amazon's adjusted profit in the first quarter soared 117% from the year-ago period to $7.09 per share. That smashed Wall Street estimates of $4.72. Earnings growth has been in triple digits or higher for the past five quarters. However, estimates for the second quarter are for growth of 9%.
The Gladiator In Amazon Ranks
While the growth of its core e-commerce business is slowing, the gladiator in company ranks is Amazon Web Services, the company's cloud computing unit. In the first quarter, AWS reported revenue of $7.69 billion, up 41% from the year-ago period, with operating income of $2.2 billion. Its cloud unit is poised to sustain a growth rate of more than 40% for the 10th straight year.
The IBD Stock Checkup Tool shows that Amazon has an IBD Composite Rating of 98 out of a best-possible 99, meaning the stock ranks high in terms of key performance metrics and technical strength. It has a Relative Strength Rating of 81, which also reflects strong stock market performance.
It has a stellar 99 EPS Rating, which compares quarterly and annual earnings-per-share growth to all other stocks.
The company currently holds the No. 1 ranking among its peers in IBD's Retail/Internet industry group. Etsy (ETSY) is second, and then eBay (EBAY).
With a current market cap of roughly $934 billion, Amazon is closing in on the $1 trillion mark. That's when Amazon stock would likely pass its record high of 2,050.50, set Sept. 24. It's the one and only day Amazon's market valuation topped $1 trillion. Only two other companies have breached the $1 trillion level: Apple and Microsoft (MSFT).
Amazon is actively pursuing new business opportunities, such as its expansion into groceries and apparel. The company also is exploring the health care market, having acquired online pharmacy company PillPack last year for just under $1 billion. Further, Amazon is joining the race to launch a constellation of satellites for broadband internet connectivity to underserved areas.
The company leads the market in smart speakers with its line of products called Echo. Amazon also is venturing into the transportation field.
