Buying More of Amazon
My personal feeling is that Amazon's quarterly report may have the ability to surprise investors from August 1st. During a recent background of massive correction moves in techs, shares of Amazon lost about 7.5% from 8th to 30th of July, compared to the e-commerce bellwether's peaking price above $200. This represented not such a big discount compared to many other components of the Nasdaq Composite index, pointing that the crowd wants to believe in Amazon's strength. Meanwhile, the impact of Microsoft's drop in the after-hours trading yesterday quickly increased this gap in Amazon price to 12% from all-time highs, which makes shares of Amazon much more attractive.
Analysts' consensus projections for a more than 10% surplus in Q2 sales to approach $150 billion are here, also betting for an EPS at least an inch above the psychological threshold of $1 per share, as it was last Christmas quarter's record achievement for the time being. However, could you imagine what would happen with a price if actual numbers come out far beyond consensus estimates? First, accelerating demand on cloud computing is a factor to drive Amazon Web Services (AWS) marginality up to the skies. The help of generative AI tailwinds is real. If so, forget about Amazon's core business, even though it is seemingly climbing to new highs as well. The retail platform and advertising income may benefit much from Amazon's faster deliveries, which may give more conversion, despite all those struggling low-end consumers. There was a big crowd of new loyalty program sign-ups on Prime Day. It generated $14 billion in sales in the US to mark nearly 11% of gains YoY, Adobe Analytics figured. This may boost overall record sales well above consensus ideas. I anticipate the sales number above $155 billion and EPS of $1.10 or even better.
That's why I decided to buy more Amazon shares, even without waiting for the official quarterly release. A break through $190 may give an extra boost to the stock's price immediately, but I don't want to buy above $200, when it currently trades between $175 and $180. Well, if something goes wrong, Amazon will come back soon. Yet, in my baseline scenario, the stock price would soar by double-digits, in after-hours this Thursday's night. Citigroup now has its target price for Amazon at $245 (!) per share, projecting a 17.5% surplus in AWS and operating income of $13.88 billion. This is surely not the main argument for my mind, but this certainly gives me extra power to stay positive on Amazon.
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