- Summary:
- Amazon share price has had one of its worst performance in more than a decade. We explain whether Amazon Stock is a good buy.
Amazon stock price has had one of its worst performances in more than a decade. The stock has crashed by more than 43% this year and is down by over 50% from its all-time high. It was trading at $94 on Friday, which is slightly above the lowest level this year. Its market cap has crashed by more than $1 trillion to $960 billion.
Falling revenue growth and profitability
Amazon has had a difficult year as it continues facing numerous challenges. The biggest challenge is that the company’s growth rate and profitability are slowing down. Its growth was affected by the broad macro factors like supply chain and high inflation.
The most recent results showed that the company’s growth was decelerating. Its net sales increased by 15% to $127.1 billion. This growth was impacted negatively by the strong US dollar, which affected its results by about $5 billion. North America sales jumped by 20% to over $78 billion while its international revenue plunged by 5%. AWS, its crown jewel, saw its revenue jump by 27%.
Amazon’s profitability declined sharply as well. It dropped to $2.9 billion while its operating cash flow increased by 27% to $39.7 billion. The company predicted that its cloud computing sales would start to moderate as customers control their costs. Further, its portfolio holdings like Rivian have seen their valuation slump as interest rates surge.
Therefore, it is clear that Amazon’s fundamentals are not okay. Also, like Meta Platforms, the company has moved from being a growth stock into a value company. Still, there are several catalysts that could push the Amazon stock price higher. First inflation and supply chains have started improving in the past few months.
Second, the company has a strong balance sheet. It has over $58 billion in cash and short-term investments and $65 billion in debt. The firm is also looking to make improvements by laying off thousands of workers. Further, the company’s cloud business will likely continue growing in the coming months. Its annual run rate is expected to hit $100 billion in the next few years.
Amazon stock price forecast
The daily chart shows that the AMZN share price has been in a strong bearish trend in the past few months. It dropped below the important support at $100, which was the lowest level in June. It has moved below all moving averages. The stock has also formed an inverted cup and handle pattern, which is a bearish sign.
Therefore, the stock will likely continue falling as sellers target the next key support at $85. A move above the resistance at $105 will invalidate the bearish view.
