Amazon.com, Inc. (AMZN) is the world’s largest e-commerce and cloud infrastructure company. It is continuing to chart a path to retail-market domination and has benefited from recent investments in logistics and distribution to meet increased COVID-19-related shopping-from-home demand.
The stock hit an all-time high in September. The pandemic has catapulted the company into an unprecedented position. Although AMZN’s e-commerce penetration and cloud infrastructure are growing rapidly, the stock has demonstrated weaker performance when compared to some of its competitors. Also, difficulties in getting products to customers on time during the holiday season due to insufficient logistical capacity could be detrimental for the company’s sales outlook.
AMZN’s unique business model and its growing customer base have pushed it to a 79.7% gain over the past year. The stocks hit its all-time high of $3,552.25 in September. However, the challenges it faces, along with a few other negative factors, have led our proprietary ratings system to rate the stock as “Neutral.”
Here is how our proprietary POWR Ratings system evaluates AMZN:
Trade Grade: C
AMZN is currently trading lower than its 50-day moving average of $3,183.01, but higher than its 200-day moving average of $2,793.56, which does not indicate a promising trend. Moreover, AMZN has gained just 1.2% over the past month, indicating almost no momentum.
For the fiscal third quarter ended September 30, 2020, AMZN’s revenue increased 37% year-over-year to $96.14 billion, while interest income declined 47.3% from the prior-year quarter to $118 million. Operating income has increased 93.8% from the year-ago value to $6.19 billion, while EPS rose 193% from the prior-year quarter to $12.63. Its free cash flow has declined 7.4% sequentially to $29.50 billion over this period.
On December 15, AMZN’s Amazon Web Service was selected by Twitter, Inc. (TWTR) to power the real-time, global traffic and improve the experience for Twitter users. AMZN also recently announced that Zalando has selected AWS to run all of its machine learning workloads. This will enable AMZN to broaden its comprehensive cloud platform to meet the increasing consumer demand.
On November 17, the company launched Amazon Pharmacy to enable customers to purchase their medications online through an app. This expansion will help the company serve more customers while tapping into a new branch of retail operations.
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 10.9% below its 52-week high of $3,552.25, which it hit on September 2nd.
The company’s net revenue grew at a CAGR of 29.3% over the past three years, while net income increased at a CAGR of 108.2% over this period. AMZN’s EPS increased at a CAGR of 105.8% over the past three years. This can be attributed to the surge in order volumes during the pandemic, with people ordering essentials online to avoid exposure to the virus.
Peer Grade: D
All these industry competitors have comfortably beaten AMZN’s 79.7% gain over the past year. ETSY, SNAP, and CVNA have gained 301.9%, 242%, and 173.1%, respectively, over this period.
Industry Rank: A
The Internet industry is ranked #15 of the 123 StockNews.com industries. The companies in this industry are engaged in numerous online business opportunities including cloud services, content, auction exchanges, e-commerce sales, and advertising sales.
The internet infrastructure has been experiencing exponential growth amid the COVID-19 pandemic. Although the pandemic has impacted most industries negatively, it has proven to be a boon for e-commerce and online retail companies. The cloud computing platform has also been witnessing a surge in demand due to the accelerated pace of digital transformation adopted by businesses across the globe.
Overall POWR Rating: C (Neutral)
Despite reporting strong performance in the e-commerce and cloud-based business, AMZN is rated “Neutral” due to the challenges it is currently facing, as determined by the four components of our overall POWR Rating.
AMZN may not be able to surpass its all-time high in the near term because of the challenges like logistical strains and high worker turnover amid a surge in online shopping during the holiday season.
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AMZN shares were trading at $3,219.70 per share on Wednesday afternoon, up $54.58 (+1.72%). Year-to-date, AMZN has gained 74.24%, versus a 16.57% 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.Will Amazon Surpass its All-Time Highs in 2021? appeared first on StockNews.com