Prime buying opportunity for Amazon stock?
Amazon shares have surged this year. Is the stock still a good investment ahead of the Prime Day extravaganza?
Amazon is about to hold its no longer entirely factually correct Prime Day “Christmas in July” shopping sale, offering big deals for customers over a period of two (plural) days as opposed to one singular Prime Day. Prime members will have their chance on July 11 and 12 to save big on all the numerous things they can purchase via Amazon as well as from the company’s Whole Foods subsidiary.
But while Amazon customers may find plenty of bargains over the next two days (I may scoop up the soon-to-be-released Colson Whitehead novel and more cat food) Amazon investors don’t really have an opportunity to get the stock at a discount.
Amazon has surged more than 50% this year. The stock has taken part in an epic tech/Nasdaq/FAANG rally so far in 2023. As a result, shares of Amazon now trade (for those who still care about valuations) at more than 80 times 2023 earnings estimates and nearly 50 times profit forecasts for next year.
Yes, Amazon has defied conventional Wall Street wisdom for decades now. It’s always been a pricey stock and it has usually lived up to the hype by posting extremely robust gains in sales and earnings year after year.
That’s likely to continue. Analysts are forecasting a more than 11% jump in revenue for 2024 (not too shabby given how big and cumbersome a company Amazon now is) and they also expect earnings per share to skyrocket nearly 63%.
But Amazon stock is priced for perfection. So the company is going to need to deliver (heh) extremely strong results when it reports second quarter earnings later this month. Are consumers starting to feel the pinch of inflation? Will that impact Amazon’s top and bottom line? Perhaps.
A more pressing question is whether or not companies are starting to cut back on IT spending. After all, Amazon is a cloud tech giant in addition to being a retail powerhouse. The company’s AWS unit makes up a big chunk of Amazon’s overall operating profit and revenue for the cloud business is growing more rapidly than the core commerce business. So Amazon investors may still find the stock to be a tempting purchase if the company continues to generate “Prime” growth rates.