How to Trade Amazon Stock Amid Cost Cutting Measures
Most major technology companies have announced cost cutting measures as the economy slows down and borrowing costs become more expensive with rising inflation and interest rates.
Learn more about Amazon’s cost cutting measures and how this may impact its share price and what the analysts are forecasting for the stock.
|Symbol for Invest.MT5 Account:||AMZN|
|Date of Idea:||27 Mar 2023|
|Time Line:||1 - 6 months|
|Position Size for Invest.MT5 Account:||Max 5%|
- The Invest.MT5 account allows you to buy real stocks and shares from 15 of the largest stock exchanges in the world.
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Trading Amazon Stock Amid Cost Cutting Measures
In an internal memo sent last week from Amazon CEO Andy Jassy to its staff, it detailed plans for the company to cut 9,000 jobs in divisions such as cloud computing, advertising and human resources. This is on top of the already announced 18,000 job cuts in its retail, devices and human resources group.
The e-commerce giant is trying to streamline its costs due to the uncertainty of the future. The focus is now to become leaner but still invest in long-term projects and consumer experiences. These are the largest layoffs in the company’s 28-year history and come after a huge spending spree during the pandemic which raised the workforce to more than 1.6 million people.
The slowing growth in its main retail business also influenced the decision in activating a hiring freeze and ending some of its more experimental projects. The combination of slowing growth, higher expenses and an uncertain economic outlook have weighed on most technology companies.
According to some analysts, these cost cutting measures could help Amazon’s profitability. Morgan Stanley analyst Brian Nowak has stated that earnings before interest and taxes could help the Amazon Web Services division rise by 100 basis points.
Other analysts have rated the stock as a hold due to the impact of rising costs on the business and the consumer. While job cuts can help to cost cuts, the mere fact it is being done shows that a business is struggling or forecasted to struggle.
While Amazon Web Services is the largest cloud computing provider in the world, generating a significant chunk of revenue for the company, the rest of Amazon’s products and services are highly dependent on the health of the consumer. Analysing the macroeconomic environment is just as important as analysing company fundamentals for stocks such as Amazon.
Amazon Stock Forecast - What do the Analysts Say?
According to analysts polled by TipRanks for a Amazon stock forecast in the past 3 months, there are currently 37 buy, 1 holds and 0 sell ratings on the stock. The highest price level for a Amazon stock forecast is $192.00 with the lowest price target at $106.00.
The average price target for a Amazon stock forecast is $136.86.
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 $103.00.
- Target just below the highest analyst price target of $136.00.
- Keep your risk small at a maximum of 5% of your total account.
- Time Line = 1 – 6 months
- If you buy 10 Amazon shares:
- If target is reached = $330.00 potential profit ($136.00 - $103.00 * 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, especially considering the reason Amazon and major tech companies are cutting back on costs – a slow down in the economy.
Be sure to exercise good risk management and always know how much you could potentially lose on a trade and the risks involved, as well as the costs.
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.
There is a low minimum transaction fee of $1. So, the example trading idea above would result in a commission of just $1 overall!
How to Buy Amazon Stock in 4 Steps
With Admirals, you can buy shares in companies like Amazon with a low commission of just $0.02 per share and a low minimum commission of just $1 on US stocks.
- Open an account with Admirals to access the Trader’s Room.
- Click on Trade on one of your live or demo accounts to open the web platform.
- Search for your stock at the bottom of the Market Watch window and drag the symbol onto the chart.
- Use the one-click trading feature, or right-click and open a trading ticket to input your trade size, stop loss and take profit level.
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 account allows 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. Learn more about CFDs in this How to Trade CFDs article.
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