Trading Amazon Ahead of Black Friday Weekend

Black Friday weekend has arrived and, in its relatively short history, it has quickly become one of the biggest sales events for retailers in the build-up to what is usually their busiest season.

Online retailers, such as Amazon, have been advertising Black Friday deals all week in an attempt to squeeze as much revenue out of this year’s event as possible. This year’s Black Friday event arrives during a challenging period for Amazon, who will be hoping to replicate last year’s record breaking weekend. After a difficult time so far in 2022, could this weekend mark a turning point for the e-commerce heavyweight?

Learn how to trade Amazon shares below.

• 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. Therefore, you should never invest more than you can afford. Start small to understand your own risk tolerance levels or practise on a demo account first to build up your knowledge before investing in the live markets.

Trading Amazon – The Current Picture

After enjoying fantastic financial results and an equally brilliant stock market performance during the pandemic, 2022 has been less kind to Amazon.

Recent Financial Performance

In the first nine months of the year, total net sales grew 10%, but the company reported a net loss of $3 billion compared to net income of $19 billion the previous year. Although it should be noted that much of this net loss is attributable to Amazon’s major stake in Rivian Automotive, whose share price has plunged this year.

However, rising prices also played a part. Whilst total net sales increased 10%, total operating expenses rose by 14%, squeezing profit margins. These results, combined with a gloomy economic outlook and a general stock market malaise, have led to Amazon shares losing around 45% of their value so far this year.

High inflation and rising interest rates is also likely to have dampened consumer demand, and will continue to do so in the near future. However, the latest inflation figures from the US, which is by far Amazon’s largest market, were more promising than expected.

The Economic Outlook

Inflation fell from 8.2% in September to 7.7% in October, considerably better than the 8% which had been forecast. This suggests that the Federal Reserve’s aggressive approach to monetary policy is beginning to bear fruit and that US inflation may have already peaked. If this is the case, then it is undoubtedly great news for Amazon and other US retailers.

Whilst consumers will still be feeling a squeeze on their discretionary income, things could start to get better, and a strong showing for Amazon during Black Friday and the remainder of the fourth quarter could improve investor sentiment towards the beleaguered stock.

However, investors should be careful of reading too much into the lower inflation figures. Whilst the number is certainly moving in the right direction, inflation is likely to remain elevated for a while to come, with the Fed predicting it won’t return to its target level of 2% until 2024.

This could limit consumer spending and keep costs high for Amazon over the next year. Nevertheless, in Amazon’s latest quarterly results, CEO Andy Jassy stated they were making “steady progress” on lowering costs across their fulfilment network and there are also reportedly plans to cut around 10,000 jobs.

A Longer-Term Prospect?

Black Friday is not going to make or break Amazon. Regardless of how the company performs in Q4, the current economic climate is likely to continue to cause problems.

However, Amazon is well-placed to bounce back and thrive in the future. It holds a leading market share in US e-commerce, the second largest e-commerce marketplace in the world, and has more than 200 million Prime members worldwide. Furthermore, Amazon’s most profitable business, Amazon Web Services (AWS), is the main player in the global cloud computing market and continues to go from strength to strength.

Due to all of the challenges noted earlier, Amazon’s share price has fallen and is currently trading at a historically low valuation. Its price to sales ratio (i.e. the company’s market capitalisation compared to its total sales) is the lowest it has been for seven years. This could represent an opportunity to buy a piece of a quality company at a lower price.

Whilst share price volatility is likely to continue in the short-term, its historically low valuation and promising future outlook may make Amazon an appealing prospect for investors with a longer time horizon. But what do the analysts say?

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 33 buy, 2 holds and 0 sell ratings on the stock. The highest price level for an Amazon stock forecast is $192.00 with the lowest price target at $103.00. 

The average price target for an Amazon stock forecast is $139.88 - which represents more than 50% upside from the current price at the time of writing.

An Example Trading Idea for Amazon Shares

An example trading idea for the Amazon share price could be as follows:  

• Buy the stock at $95 to allow for current market volatility. 
• Target just below the average analyst price target at $139. 
• Keep your risk small at a maximum of 5% of your total account.   
• Timeline = 12 months
• If you buy 10 Amazon shares:  
• If target is reached = $440 potential profit ($139 - $95 *10 shares).

It’s important to remember that the share price is unlikely to go up in a straight line and it may even go down before it rises, if it rises at all. This is especially true currently, given the current economic climate and the high levels of volatility in the stock market.

Therefore, it is crucial to exercise good risk management, which is one of the most important aspects of successful trading. You should always know how much you could potentially lose on a trade and the precise risks involved.  

Another factor to consider is the commission, which can eat into your profits. With the Admirals Invest.MT5 account you can buy US stocks from $0.02 per share; however, there is a minimum transaction fee of $1. So, the example trading idea above would have resulted in an overall commission of just $1! 

How to Buy Amazon Shares in 4 Steps

With Admirals, you can buy shares in Amazon and over 4,500 other listed companies! In order to buy Amazon shares, follow these steps:

• Open an Invest.MT5 account to access the Trader’s Room
• Click Invest next to your account in order to open the MetaTrader WebTrader   
• Search for Amazon shares at the bottom of the Market Watch window and drag the symbol onto the chart
• Click New Order at the top of the screen and enter the number of Amazon shares you want to buy

Click on the banner below to buy Amazon shares 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 could choose to go short using CFDs (Contracts for Difference).

The Trade.MT5 and Trade.MT4 accounts from Admirals both allow you to speculate on the price direction of a wide variety of stocks, including Amazon, using CFDs.  

This means you can trade long and short to potentially profit from both rising and falling stock prices. Learn more about CFDs in this 'How to Trade CFDs' article. 

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 modelled 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.