Since going public in 1997, Amazon finally managed to reach a $1 trillion valuation in 2018. While the company's stock price has struggled at different times in its history, it still amounts to a dizzying 80,000% share price growth. Much of this growth is down to its founder, Jeff Bezos.
Bezos' annual letter to shareholders is high on the reading list of every investor. And, after releasing the letter in early April, it has investors on high alert. In this article, we explore the contents, the impact on its share price and the possible trading opportunities for Amazon stock.
Jeff Bezos' Multi-Billion Dollar Warning
"Amazon will be experimenting at the right scale for a company of our size if we occasionally have multi-billion dollar failures," Bezos said in his annual shareholder letter. "We will work hard to make them good bets, but not all good bets will ultimately pay out."
For most investors, having the CEO of a trillion-dollar company talk about having multi-billion dollar failures may be cause for concern. However, Bezos is no ordinary CEO. After founding Amazon as an online bookstore in 1994, Bezos has built Amazon's revenue stream from a multitude of places such as Amazon Studios, Amazon Electronics, Amazon Grocery, Amazon Cloud (AWS), a raft of artificial intelligence products and government contracts, and their world famous Amazon.com e-commerce site.
Of course, Bezos also sustained a positive attitude in his letter, rather than just warning signs, stating that: "The good news for shareowners is that a single big winning bet can more than cover the cost of many losers." Sage advice for many traders! But where will this big winning bet come from? Will it be Amazon's foray into the $3 trillion a year health care market? Internet deliveries from outer space? Only time will tell, but analysing Amazon's share price and viewing analyst expectations could give us a headstart.
What Do Amazon's Analyst Expectations Suggest?
Out of 45 surveyed brokers and investment banks, 40 have a buy rating on the stock and five have an 'overweight' rating. In fact, many investment banks such as RBC Capital Markets, Deutsche Bank and the Credit Suisse Group, initiated their buy ratings this year. Of course, this never means the stock price will just go up - but it does show that these big investors feel positive about the fundamentals of the company.
In fact, out of these surveyed brokers and investment banks, the average price target for the stock is $2,128, with the highest target at $2,450 and the lowest target at $1,850. While these are merely just the opinions of different analysts, the figures represent some possible upside in Amazon's share price from its current level. What does the chart tell us?
Trading Amazon Stock CFDs
The long-term price chart of Amazon, shows a clear trend higher, as shown below:
Source: Admiral Markets MT5 Supreme Edition, AMZN, Weekly - Data range: from April 10, 2011, to April 15, 2019, accessed on April 15, 2019, at 11:28 pm BST. - Please note: Past performance is not a reliable indicator of future results.
Zooming in to more recent price action on the daily chart and it is clear there is some upside left before the median price target for different analysts of $2,128, as shown below:
Source: Admiral Markets MT5 Supreme Edition, AMZN, Weekly - Data range: from November 15, 2017, to April 15, 2019, accessed on April 15, 2019, at 11:33 pm BST. - Please note: Past performance is not a reliable indicator of future results.
This type of analysis can be useful for traders in choosing a directional bias on the stock. As recent price action shows, markets do not just move in a straight line. Therefore, traders will often use technical analysis tools and indicators to help identify possible entry and stop loss levels that provide low-risk buying opportunities. You can learn more about online stock trading strategies for this year in 'Forex & CFD Markets 2019'.
One of the best ways to test your strategies, trading tools, theories or ideas is by using a risk-free demo trading account for the MetaTrader 5 platform so you can access global stocks, currencies and commodities starting today.
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