(Note: The author of this fundamental analysis is a financial writer and portfolio manager.)
Amazon.com Inc's (AMZN) stock has risen 37% in 2018 easily beating the S&P 500's return of 1%. Despite the stocks significant rise this year it is well off its highs, and now technical analysis suggests the stock may drop 8% in the coming weeks from its current price of around $1,600. The negative chart comes as some analysts and bulls on Wall Street see the stock rising, and even suggest buying the stock on the recent weakness.
Despite some bullish calls, consensus earnings and revenue growth estimates have fallen since the end of September.
The chart shows that the stock is trading around technical support at $1,620. If the stock stays below that support region, it could fall back to the recent lows around $1,480. Additionally, the stock has been in a steep downtrend and failed to rise above it, another bearish sign. Should the stock fall, it would be 28% off its 2018 years.
The relative strength index has also been trending lower since reaching overbought levels at nearly 90 in early January. Volume levels have also been above their 3-month moving average recently as the stock has fallen, suggesting an increasing number of sellers.
Reducing Earnings Estimates
Analysts have reduced their fourth-quarter earnings estimates 6% over the past month to $5.51 per share. Meanwhile, revenue estimates have declined 3% to $71.9 billion.
Slower Growth Forecast
Earnings growth estimates for 2019 have fallen sharply since the end of September. Analysts now estimate that earnings will grow 35% versus prior estimates for growth of 48%. Additionally, revenue growth estimates have fallen sharply as well, and are seen rising 21% down from prior estimates of 22%.
AMZN EPS Estimates for Next Fiscal Year data by YCharts
Revenue growth forecasts for 2020 have fallen as well.
The stock has fallen sharply from its highs with around $200 billion in market cap lost. But if there is a silver lining, the company is still growing very quickly. So while Amazon and many of its technology peers may be out of favor, it may only take a change in market sentiment to get the stock rising again.
Michael Kramer is the Founder of Mott Capital Management LLC, a registered investment adviser, and the manager of the company's actively managed, long-only Thematic Growth Portfolio. Kramer typically buys and holds stocks for a duration of three to five years. Click here for Kramer's bio and his portfolio's holdings. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future performance.