Amazon.com, Inc Wins Big, But AMZN Stock Is Facing Strong Resistance

After a strong holiday season, Amazon.com, Inc stock is moving towards $1000 but it faces strong resistance at current levels.

The holiday season is over, and results are out. Online retail chains, like Amazon (NASDAQ:AMZN), scored big over their brick and mortar counterparts. The National Retail Federation expects the retail sales to grow by 3.6%, but much of the growth will be from online sales. According to a report from Adobe, the online retail sales grew by 11% this holiday season (between November 1 and December 31) hitting $91.6 billion. The report was based on aggregated and anonymous data from 24.6 billion visits to retail websites including 80% of all online transactions from the top retailers. There are reports that Amazon cornered a major chunk of these sales.

In a press release, last week, Amazon had said that it was the company's "best ever" holiday season. Consumers are increasingly choosing the option of staying back home and ordering on Amazon over visiting the crowded malls and stores. According to Slice intelligence, Amazon accounted for 38% of overall online sales. Best Buy (NYSE:BBY) came in at second place with a 3.9% share. Other reports peg Amazon's share even higher.

amazon_slice_holiday_sales

Source: Slice Intelligence

But the changing consumer behavior has hit the brick and mortar chains hard. In a press release, Macy's (NYSE:M) announced that it would be closing 68 stores and laying off more than 10000 people after the company reported a dismal quarter. The same store sales declined by 2.1%.  It is not Macy's alone, other departmental stores are facing similar challenges.  The holiday season report led to a blood bath in retail stocks yesterday. Macy's was down 13%, JCP (NYSE:JCP) down 7.2% and Kohl's (NYSE:KSS) was down 19%. Those are pretty scary numbers. On the other hand, Amazon stock gained more than 3% yesterday.

While there is carnage going on in the brick and mortar space, with many retail chains closing hundreds of their stores, Amazon is doubling down on its physical presence. The company recently confirmed that it will be opening its fourth Amazon Books shop in Manhattan soon. Amazon is also planning to open more than 100 pop-up stores. Pop-up stores, with 300 to 500 square feet in area, contain a variety of Amazon products including Fire Tv, Kindle and Echo devices. Amazon sees these stores as a means of directly reaching out to customers and helping in building trust and loyalty. (Also read: Are Fundamentals Really Driving Amazon.com, Inc. (AMZN) Stock Higher?)

Prime Paying Off

Amazon's huge push towards Prime subscription is paying off. The "everything store" announced that it shipped more than a billion products this holiday season with Prime. More people used Prime services this holiday season than ever before. Amazon has more than 50 million prime subscribers in the US, netting the eCommerce giant around $5 billion in subscription fees. But it is not the fees which are the major attraction for Amazon. Prime customers tend to spend much more than non-prime customers. According to reports, prime customers, on average, spend as much as 2.4X the non-prime customers. Even the quick delivery service, Prime Now, is showing strong growth. According to Slice intelligence, Prime Now accounted for 15% of Amazon's total shipment during the later part of the holidays compared to 10% last year. The Prime Now service helped Amazon claw back market share from its competitors during the late holiday season when customers wanted quick deliveries. The two-hour delivery service came in handy for many customers.

Amazon Stock Is Facing A Major Technical Resistance

amzn_tech_01_06_17
On the back of more than a 3% rally in the stock price yesterday, Amazon stock was able to close above the 50-day SMA for the first time since it gapped down after the surprise Q3 earnings miss. The 50 day SMA had been acting as a resistance line since then and had made a bearish crossover in December. But the stock now faces a major resistance from its 100-day SMA. As you can see from the chart above, the 100-day moving average has been acting as a strong resistance line. Amazon stock has made multiple attempts to breach the resistance but had been unsuccessful. The multiple failed attempts indicate that the 100-day moving average is offering a strong resistance. The stock is testing the 100-day moving average again. If it is able to breach the resistance line, then the stock could go higher on strong momentum. (Also read: Why Amazon.com Inc's Disruption Phase Is Over Now)

Amazon stock has huge upside

According to research firm eMarketer, online sales will continue to grow at double-digit rates till 2020. The research firm expects retail eCommerce sales to more than 2.6 times from $1.9 in 2016 to $4.058 in 2020. The trends during the holiday season indicate that Amazon will corner a huge chunk of that growth. The strong growth in eCommerce will act as a major catalyst for Amazon stock. And eCommerce is only one of the areas where Amazon is showing strong performance. The AWS segment is likely to continue its phenomenal growth this year. Amazon continues to remain a strong growth story. While the stock is currently facing strong technical resistance from the 100-day SMA, it could touch $1000 by year end. The consensus analysts price target for Amazon stock is $924, which represents almost 20% upside from yesterday's close. Amazon stock continues to remain a good buy.

Looking to invest in tech stocks? Check out Amigobulls' top stock picks, which have outperformed NASDAQ by over 113%.


Amazon Stock Articles & Video


Kumar Abhishek Kumar Abhishek   on Amigobulls :

Neither Amigobulls, nor any members of its staff hold positions in any of the stocks discussed in this post. The author may not be a certified/registered investment advisor, and the opinions expressed should not be treated as investment advice. Buying and selling of securities carries the risk of monetary losses. Readers/Viewers are advised to carry out their own due diligence and consult their investment advisors before making any investment decisions. Neither Amigobulls, nor the author have any business relationship with any of the companies covered in this post.

show more

Comments on this article and AMZN stock

Do share this awesome post