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Amazon share price: where next as the stock passes $3,000?

We examine Amazon’s recent share price performance, its first quarter results and its second quarter guidance.

AMZN Source: Bloomberg

After crossing the US$3,000 mark on Monday, 6 June – e-commerce giant Amazon (AMZN) finished yesterday’s session at US$3,000.12 per share – implying a market capitalisation of approximately US$1.5 trillion.

Amazon share price: analysts remain bullish

Overall, Amazon has seen its share price rise close to 60% YTD, as traders and investors flock to to companies that have likely benefitted from the accelerated growth in ecommerce as a result of the coronavirus pandemic.

In spite of that run-up, analysts have remained bullish on the e-commerce giant’s prospects, with the stock carrying a Buy rating on average, according to MarketWatch. In saying that, according to MarketWatch, the average analyst price target on Amazon stands at US$2,816 per share – implying that the stock may have potentially run ahead of its fair value.

Q1 results & Q2 guidance at a glance

Looking at Amazon’s most recent quarterly results, the company's cash generative ability continues to prove impressive, though the its earnings suffered during the first quarter and are expected to suffer in the second quarter, as well.

As the company reported in April, for the quarter ending 31 March and on a trailing twelve month basis, Amazon saw:

  • Operating cash flow hit US$39.7 billion, up 16%
  • Free cash flow hit US$24.3 billion
  • Net sales hit US$75.5 billion, up 26%
  • Operating income hit US$4.0 billion
  • Net income reached US$2.5 billion, down from Q1 FY19 net income of US$3.6 billion

Mind you, as Amazon’s visionary Chief Executive, Jeff Bezos flagged during those results, earnings are expected to suffer in the second quarter as a consequence of Covid-related expenses.

‘If you’re a shareowner in Amazon, you may want to take a seat, because we’re not thinking small. Under normal circumstances, in this coming Q2, we’d expect to make some $4 billion or more in operating profit. But these aren’t normal circumstances.’

‘Instead, we expect to spend the entirety of that $4 billion, and perhaps a bit more, on COVID-related expenses getting products to customers and keeping employees safe,’ Mr Bezos finished.

Though substantial uncertainty is expected as a result of Covid-19, Amazon anticipates that Q2 net sales will come in at between US$75.0 billion and US$81.0 billion, implying a growth rate of between 18% to 28%, on a year over year basis. By comparison, the e-commerce giant expects to report operating income of between a loss of US$1.5 billion or a gain of US$1.5 billion. That income guidance takes into consideration Mr Bezos’ above noted cost considerations.

Amazon is expected to report its second quarter, FY20 results on Thursday, July 23.

Other bits and pieces

More recently, the company, on 7 July announced that it was set to open its first fulfillment centre and its second delivery station in Arkansas.

The centre, set to be opened in 2021, will see 1,000 new full-time jobs created.

How to trade Amazon – long and short

What do you think: are you bullish or bearish on Amazon’s prospects? Trade accordingly. For example, you can trade Amazon shares and other US tech stocks – both LONG and SHORT – through IG’s world-class trading platform now.

To buy (long) or sell (short) Amazon with CFDs, follow these simple steps:

  1. Create an IG Trading Account or log in to your existing account
  2. Enter ‘Amazon’ in the search bar and select it
  3. Choose your position size
  4. Click on ‘buy’ or ‘sell’ in the deal ticket
  5. Confirm the trade

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer.

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