Növekedési részvény: Amazon (Angol hír)

The world-renowned Amazon (AMZN.US) is an American company for e-commerce and cloud computing services at all levels based in the American city of Seattle, Washington State. It is one of the first large companies to sell goods over the Internet, and it deserves the credit to remember it.

Today, Tuesday, June 22, the Company celebrates the "Amazon Days" and taking advantage of the event, we review the news about the value, its latest corporate operations and the technical price movement.

Valuation and last fundamentals

It continues to generate strong revenue and profitability growth in 2021, continuing the results achieved during the pandemic in 2020. However, investors who have been tracking Amazon shares for the last 12 months or so would look forced to think otherwise. After a big move last year, stocks have practically frozen since mid-2020, where their lateral range is marked by lows of $ 2,785 and resistance at $ 3,550. The stock meme craze has been much more attractive to the retail investor, while Amazon's short-term underperformance has been disappointing to many long-term investors.

However, things could look very different in the next 6 to 12 months. Amazon is ready to scale new highs, and it's not just the price that shows it and, the technical analysis developed below following the Wyckoff criteria points to the beginning of a great bullish movement in the price.
 
The main driver of a company's price is free cash flow (FCF), and Amazon is poised to offer much more. Amazon's highest-margin businesses - Amazon Web Services (AWS) and Digital Ads (hidden under "Other" in financial statements) - are experiencing rapid growth. Additionally, your “traditional” e-commerce business continues to generate large-scale amounts of free cash flow.

In the past year, Amazon raised $ 67 billion in cash from operations, representing a 69% Y / Y increase. As business shows no signs of slowing down after the pandemic and looming cost reduction from the pandemic (billions of dollars each quarter), Amazon could post a new record free cash flow figure this year. As you may know, Amazon's balance sheet is already a strength.

Amazon has underperformed the S&P 500 Index (US500) by about 6% in the prior 12-month period. With continued business momentum and a stagnant share price, Amazon's trading multiples have been declining sharply since August 2020.

Amazon about to start again

During the 2021 quarter, net sales were $ 108 billion (+ 44% year-over-year) thanks to the rapid acceleration of advertising and AWS revenues (recall the "Other" section). In addition, the increase in the activity of streaming services (Amazon Video and Amazon Music) and in its "core business", the sale of products over the internet.

source: Amazon Q1 earnings results

So, with the boost from higher margin revenue lines, Amazon's operating margin (profitability) is improving rapidly. In the latest quarter, Amazon's 12-month operating margins (TTM) hit an all-time high of 6.63%. In Q1'21, Amazon's operating income increased approximately 122% Y / Y to $ 8,865 million. That, with these growth rates, for the next 12 months that figure would be very short, being able to achieve record operating income between $ 40,000-$ 50,000 million. Thus, the FCF that we mentioned at the beginning can also reach record levels, which would translate into a higher price of its shares.

Technical analysis

Analyzing the lateral range developed during the last 12 months, we have realized that its accumulation structure closely resembles the classic Wyckoff structure of reaccumulation in an uptrend. This model could be showing signs of resistance breakdown with a target at the 161.8% fibo projection of the last correction, coinciding with the first JAC (Jump Across the Creek) to the first LPS (last point of support). Subsequently, there have been two other LPS (LPS2 and LPS3) where a breakdown of the JAC could follow, end “Phase D” and reach 161.8% of the target at $ 3,817.

source: xStation

In any case, the breakout of the last BU (Back-Up) is mandatory to confirm the move. Meanwhile, the bullish guideline of increasing lows from ST as SOW (Spring Test as sign of weakness) and the LPS1-LPS2, support the bullish context.

Dario Garcia
XTB Spain