Amazon [NASDAQ:AMZN]: FAANG stocks have been performing well lately. Amazon (AMZN) one of the biggest of them is showing every indication that it could be headed for some gains this quarter, and in coming quarters. Both technical and fundamental indicators point to a scenario where Amazon could break back above the $2000 mark and possibly test new highs.
For starters, Amazon (AMZN) has broken above the significant 3-month 50-day MA resistance at $1728.72. This is an indicator that there is strong momentum in this stock. The 3-month 200-day support at $1685.41 also held strongly during Amazon’s last correction. That’s a strong indicator that there is a strong bullish sentiment in this stock. When combined with Amazon’s strengthening fundamentals, the value of this stock could break above its 52-week high of $2050.50 in the foreseeable future.
One indicator of Amazon’s growing fundamentals is its strategic investments. For instance, a few hours ago, Tech Crunch ran an article about Amazon’s acquisition of autonomous warehousing robotics startup Canvas Technology. This startup is focused on technologies like autonomous cart systems. It will add to more efficiency at Amazon fulfillment centers. With more efficiency, Amazon will be in a position to cut costs, and improve the overall customer experience. Other Amazon investments include the fast-growing streaming market, where Amazon now has a significant market share. These are investments that will add to the company’s revenues and support its share price in the long run.
Evidence to its growing revenues is already there. From a look at Amazon’s books, it is clear that the company has a healthy quarterly revenue growth (yoy) of 19.70%. That’s pretty high, especially in the current situation where the global economy is showing signs of weakness, driven by the trade war between China and the U.S, Brexit, and rising interest rates.
Another fundamental strength to Amazon is the fact that even in an environment of rising interest rates, Amazon is well cushioned. The company has a levered free cash flow of $16.76 billion. Considering that lots of major listed corporations run on negative free cash flows, it follows that Amazon is among the companies that are unlikely to take a hit if interest rates continue to rise. The best part is that, if they remain stable and don’t rise any further, then Amazon could make even greater gains through investments, based on its huge liquidity.
It is also noteworthy that Amazon is supported by the overall upward trend in the stock markets. The U.S stock markets have been resilient this year, and keep rising. This places high beta stocks in a good position for growth all through this quarter. Amazon (AMZN) has a beta of 1.71. This means that as long as the market keeps rising, it will keep rising at a much faster rate. When its high beta is combined with growing fundamentals, Amazon’s chances of retesting $2000 are quite high. In fact, it could make new highs within the year. It’s the stock to watch in 2019, along with the other FAANG’s that also seem to be on a resurgence.