Is Amazon going to be the next company to do a stock split? Is the Amazon stock price way overvalued after reaching a new all-time high in August? Could the government break up Amazon? Should you add Amazon to your portfolio right now, or wait for a pullback? Should you even consider taking profit from your Amazon holdings? Am I adding more Amazon stock to my portfolio and if so, at what price?
In this video, I analyze the AMZN stock from 5 points of my signature Invest Diva Diamond Analysis (IDDA) which analyzes any asset from 5 points: fundamentals, technicals, market sentiment, risk assessment and overall how it can fit in your portfolio, and of course, my most recent price targets.
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The Amazon stock reached a new all-time high on Monday, August 24th, breaking above a key psychological level. It kind of makes sense. Amazon has almost single-handedly handled our shopping needs especially since COVID started, ruining other retailers on the way. It’s just the level of ease when it comes to amazon right? For example, you can get all my books both on my website and on Amazon. But almost NO one buys my books on my website EVEN though I offer a much better deal. When people buy my stuff on Amazon I make almost zero dollars because all the money goes to my publisher and the rest to Amazon. This is just one example, which also explains why we’ve been seeing so many bankruptcies in the retail sector. All of that was probably inevitable, but COVID-19 accelerated it.
Could the Government Break Up Amazon?
Amazon has become the monopoly many people are angry about… but could the government break it up? Rest assured, politicians on both sides have shown interest in doing so, but right now, with all the geopolitical tensions and a pandemic going on, it is highly unlikely to be a priority on any politician’s list. Besides, Amazon, along with other giants like Google, Facebook and Apple that people like to see broken up, aren’t just companies. In a way, they are also our most important exports, going a long way toward extending the United States’ influence around the world and adding to our soft power.
So don’t hold your breath on that…
But what about a stock split?
Reasons Why Amazon Could Be the Next to Do a Stock Split
Could Amazon be the next company to offer a stock split, following Tesla and Apple’s footsteps?
Here’s why an Amazon stock split isn’t that unlikely.
1- Amazon is a household brand name just like Apple, but its high stock price doesn’t make it feel accessible to regular retail investors. Rest assured, as I’ve talked about in my previous videos, a stock split doesn’t make any changes to the company’s valuation or even your exposure to the company’s stock. It’s basically like exchanging your $20 bill for four $5 bills. But it will make it feel cheaper.
2- Amazon has been under fire by politicians and citizens alike for a variety of reasons, ranging from how it treats its employees, to whether it’s paying its fair share of taxes. It’s enormously high stock price is the most evident thing anyone can simply point at as a metric for Jeff Bezos riches. If the stock seems more affordable, it could potentially take away the most evident measure of the company’s rise in value. Again, this would just be for PR purposes. Even after a stock split, Jeff Bezos will remain as rich as he is today.
3-Amazon could get an invitation to the Dow Jones
Back when Amazon was generally considered a tech stock, it looked unlikely that it would ever join the Dow. But now that Amazon is involved in so many different things, including communication services, and potentially even a contract with the Department of Defense (that I’ll get into in a little bit) Amazon’s business is almost entirely out of tech.
Now, of course, these are all speculations and there are no guarantees. The reason why I addressed this in this video, was because I’ve been getting this question pretty often.
Now let’s get to the Amazon stock analysis.
Amazon Stock Analysis – Fundamentals
Amazon’s market cap sits well above 1 trillion dollars, sitting pretty at 1.6T on Monday, August 24th which is when I’m recording this. Basically anyone who was watching amazon, knew they’re gonna have an impressive earnings season after the surge in coronavirus related sales.
- Online sales growth accelerated to 48% from 24% growth last quarter
- There was a sharp uptick in sales per existing member (including online grocery sales, which tripled year over year).
- Third-party seller services also accelerated (52% from 30% last quarter)
- And the most exceptional of all, was Amazon’s operating margins.
And while we all know about Amazon’s disruption of the retail industry, it also continues to find ways to evolve.
How Amazon Continues to Evolve
For example, Amazon is on a mission to turn failed malls into fulfillment centers. If Amazon can score some prime warehouse space in a great location, it’d be a huge win for Amazon, AND for consumers.
Having more fulfillment centers closer to residential areas would allow Amazon to deliver our stuff even faster.
Amazon Web Services (AWS) which is its all-important cloud company, could grow 45% and could be the driver that’s needed to take the company over a $2T market capitalization.
If that’s not cool enough, Amazon is planning to pull you up ski mountains with its latest drone to replace ski lifts. As a double black diamond skier, I can’t wait for this one to happen.
And another piece of information that’s not getting as much hype recently, is the Joint Enterprise Defense Infrastructure (JEDI) contract with the United States Department of Defense (DoD).
Simply put, the U.S. government will be paying an awarded cloud provider $10 billion over 10 years. They already chose Microsoft Azure for the JEDI contract last year, likely because Trump got involved and he’s not fond of Jeff Bezos and the fact that he owns Washington Post. Amazon disputed it, and the case is still open. If they win, that would be HUGE for Amazon.
Amazon does not pay a dividend payment so it may not be suitable for investors who prefer fixed income to capital gains. Also, if you really truly hate Jeff Bezos, then please consider that buying an Amazon stock will make him only richer… on the bright side, it might make you money as well so it’s a give and take, right?
Amazon Stock Market Sentiment Analysis
The majority of investors are either neutral, bullish or very bullish on the Amazon stock at the moment. I tend to also be on the bullish end. But we still have bears who say things like:
- Amazon’s future margin expansion trajectory will likely be uneven given its global logistics needs
- The international expansion brings challenges such as local e-commerce regulations, and fulfillment infrastructure investment requirements
- And that its AWS faces competition from well-capitalized peers like Microsoft Azure and Google
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Amazon Stock Price – Technical Analysis
The AMZN stock reached a new all-time high on Wednesday, August 26, 2020, surpassing $3,400.
This is huge because it also broke above a key psychological level.
In this video, I show mu latest price targets to buy back.
The price remains above the daily Ichimoku cloud.
Check out my book Ichimoku Secrets.
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