How to Trade Amazon Ahead of Black Friday
Amazon shares have been on a tear this year but, following a poor performance in the stock market in 2022, remain more than 20% below their all-time high. As inflation cools and we enter a period in which retail sales historically tend to thrive, what can we expect from the e-commerce giant going forward?
Keep reading to learn more about Amazon and what analysts are forecasting for the stock.
|Symbol for Invest.MT5 Account:
|Date of Idea:
|21 November 2023
|6 - 12 Months
|Position Size for Invest.MT5 Account:
- The Invest.MT5 account allows you to buy stocks and shares from 15 of the largest stock exchanges in the world.
All trading is high risk and you can lose more than you risk on a trade. Never invest more than you can afford to lose, as some trades will lose and some trades will win. Start small to understand your own risk tolerance levels or practice on a demo account first to build your knowledge before investing.
Why Trade Amazon?
Last month, Amazon released third quarter results which soundly beat analyst expectations. Below are some of the highlights from this latest earnings report:
- Revenue of $143.1 billion compared with an expected $141.5 billion – and an increase of 12.6% year on year (YoY).
- Earnings per Share (EPS) of $0.94 vs an expected $0.58 – and an increase of 235.7% YoY.
- Operating income soared 343.1% from $2.5 billion to $11.2 billion.
- Amazon Web Services (AWS) operating income rose 29% YoY to $7 billion.
- Advertising revenue jumped 26% YoY to $12.1 billion.
After a difficult year in 2022, in which share price halved and earnings plummeted amidst high inflation and rising interest rates, things have improved greatly for Amazon in 2023. Amazon’s earnings have beaten expectations in all three quarters so far this year and its share price has soared in response.
And, although the mid-point of Amazon’s forecast for fourth quarter revenue range was lower than expected, as we head into the holiday season, circumstances appear considerably better than this time last year.
Inflation in the US, Amazon’s main market, was recently reported at 3.2% in the 12 month period ending October 2023. Whilst that’s still higher than the Fed’s target rate of 2%, it’s considerably lower than the 7.7% recorded over the same period one year previously. Furthermore, the markets are expecting the Fed to cut interest rates towards the end of next year.
As the leading player in online retail in the US, a market in which it holds a 37.6% market share, Amazon should benefit from the potential rise in spending which we would typically expect to accompany lower inflation and lower interest rates.
Let’s not forget that Amazon is far more than its legacy e-commerce business and there was lots to like about Amazon’s other revenue sources in its latest results.
Unlike Amazon’s e-commerce business, where profit margins are notoriously low, AWS, its cloud computing segment, is a comparative cash cow. Although revenue growth remained flat at 12%, operating income soared 29%, resulting in an operating margin of 30.3%, its highest level since the first quarter of 2021.
Furthermore, Amazon continues to see impressive growth in its digital advertising business, with revenue soaring 26%.
However, Amazon shares are already up more than 70% so far this year, which begs the question, is all this positive news already accounted for in the stock market? Where do analysts expect the Amazon share price to go from here?
Amazon Stock Forecast - What do the Analysts Say?
According to analysts polled by TipRanks for an Amazon stock forecast in the past 3 months, there are currently 40 buy, 0 hold and 0 sell ratings on the stock. The highest price for an Amazon stock forecast is $210.00 with the lowest price target at $145.00.
The average price target for an Amazon stock forecast is $175.66.
An Example Trading Idea for the Amazon Stock Price
An example trading idea for the Amazon share price could be as follows:
- Buy the stock on a break above the post-earnings high at $150.00 to allow for volatility.
- Target just below the highest analyst price target of $175.00.
- Keep your risk small at a maximum of 5% of your total account.
- Time Line = 6 - 12 months
- If you buy 10 Amazon shares:
- If target is reached = $250.00 potential profit [($175.00 - $150.00) * 10 shares].
Remember that markets go up and down and it is unlikely the share price will move up in a straight line. In fact, it may even go much further down before it rises. Be sure to exercise good risk management and always know how much you could potentially lose on a trade, as well as the costs involved.
With the Admirals Invest.MT5 account you can buy and sell US stocks with a commission from $0.02 per share. This means buying 10 shares in Amazon stock would result in a commission of $0.20 ($0.02 * 10 shares) for executing a per-side transaction.
However, there is a minimum transaction fee of $1. So, buying 10 Amazon shares would result in a commission of just $1 overall!
How to Buy Amazon Stock in 4 Steps
With Admirals, you can buy shares in more than 4,500 companies, including Amazon, with a commission of just $0.02 per share and a minimum commission of just $1 on US stocks.
- Open an account with Admirals to access the dashboard.
- Click ‘Invest’ on your live or demo account to open the web platform.
- Search for Amazon shares in the search and click the symbol to open a price chart
- Click ‘Create New Order’, enter the number of shares you wish to purchase and hit ‘Buy’ to send your order to the market.
Click on the banner below to trade Amazon stock today! ▼▼▼
Do You See the Amazon Stock Price Moving Differently?
Remember that all analytics and trading ideas are based on the personal view and experience of the author.
If you believe there is a higher chance Amazon’s share price will move lower, then you can also trade short from a CFD (Contracts for Difference) trading account which Admirals also provide.
The Trade.MT5 and Trade.MT4 accounts allow you to speculate on the price direction of stocks and shares using CFDs.
This means you can trade long and short to potentially profit from rising and falling stock prices.
INFORMATION ABOUT ANALYTICAL MATERIALS:
The given data provides additional information regarding all analysis, estimates, prognosis, forecasts, market reviews, weekly outlooks or other similar assessments or information (hereinafter “Analysis”) published on the websites of Admirals investment firms operating under the Admirals trademark (hereinafter “Admirals”) Before making any investment decisions please pay close attention to the following:
- This is a marketing communication. The content is published for informative purposes only and is in no way to be construed as investment advice or recommendation. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and that it is not subject to any prohibition on dealing ahead of the dissemination of investment research.
- Any investment decision is made by each client alone whereas Admirals shall not be responsible for any loss or damage arising from any such decision, whether or not based on the content.
- With view to protecting the interests of our clients and the objectivity of the Analysis, Admirals has established relevant internal procedures for prevention and management of conflicts of interest.
- The Analysis is prepared by an independent analyst Roberto Rivero, Freelance Contributor (hereinafter "Author") based on personal estimations.
- Whilst every reasonable effort is taken to ensure that all sources of the content are reliable and that all information is presented, as much as possible, in an understandable, timely, precise and complete manner, Admirals does not guarantee the accuracy or completeness of any information contained within the Analysis.
- Any kind of past or modeled performance of financial instruments indicated within the content should not be construed as an express or implied promise, guarantee or implication by Admirals for any future performance. The value of the financial instrument may both increase and decrease and the preservation of the asset value is not guaranteed.
- Leveraged products (including contracts for difference) are speculative in nature and may result in losses or profit. Before you start trading, please ensure that you fully understand the risks involved.