Amazon.com, Inc.(AMZN) Stock Is Rising, Will The Rally Sustain?

Amazon.com, Inc. (NASDAQ:AMZN) stock is again within striking distance of the $1000 mark. Will AMZN stock continue to rise?

Amazon.com, Inc.(AMZN) Stock Is Gaining Momentum, Will The Rally Sustain
Flickr

Another day, another news of Jeff Bezos led Amazon.com, Inc. (NASDAQ:AMZN) looking to disrupt a new industry. Amidst the influx of fresh positive news, Amazon stock is gaining momentum and is bouncing back. AMZN stock has failed to breach the $1000 mark after it's below par Q2 earnings, which took a toll on investor sentiment. However, shares of the Seattle, Washington-based online retail giant have been on a steady uptrend for about a fortnight now, as mentioned by us in our recent coverage, gaining more than 5% in the same time frame. With Amazon stock being under pressure over the past few months, the question now is: Can AMZN stock sustain the recent momentum? Will the rally in Amazon stock continue?

Is Amazon's speculated pharmacy move worth it?

One of the latest pieces of news doing the rounds is Amazon's speculated entry into the retail pharmacy space which has once again got investors excited. A recent report suggests that the world's largest e-tailer is very close to chalking out a strategy to enter into prescription drug market. The analysts are also hinting that the online retail giant's entry into this space is only a matter of time. Leerink’s Ana Gupte commenting about the news suggested that based on her interaction with MEDACorp pharmacy benefit manager (PBM) and retail pharmacy specialists, she strongly believes that Amazon will enter the drug distribution value chain in the next two years. However, Amazon would not have it easy in this market as the prescription drug market has a lot of regulatory challenges and well-established competition.

2016-sales-by-channel-US drugs market

In spite of the above challenges, a move into the prescription drug market could be quite fruitful as this could turn out to be a strong revenue stream for the eCommerce giant. What does the prescription drug market offer?QuintilesIMS research forecasts "spending on prescription medicines in the United States will increase 4 percent to 7 percent through 2021, reaching $580 billion to $610 billion." The latest industry trends which further favor Amazon's move are; mail order was the biggest winner in the US drug retail sales in terms of net-price revenue, increasing 7.3% in 2016. Further, in the prescription drugs growth, food stores retail channel saw the highest growth among all retail channels of about 7.3% in 2016. These trends are really encouraging for Amazon, and if the company were to venture into this space, it's recently acquired Whole Food stores could be very handy to make its presence felt, given the strong growth in prescription drugs sales through food stores.

prescriptions-dispensed-US drug sales 2016

At the same time, the growth in mail orders is also welcome news for the online retail giant. Ana Gupte's commentary sheds more light on this front. She states that "AMZN is a meaningful competitive threat to existing players in the drug value chain with its best-in-class mail order fulfillment platform and easy-to-use one stop shopping Retail Pharmacy experience. AMZN is expected to quickly drive up the penetration of mail order from retail, given only one-third of scripts filled are driven by acute conditions, with the remaining two-thirds related to maintenance chronic disease management." On a similar note, the co-founder of GoodRx, a service for cost-conscious prescription drug consumers, Stephen Buck suggested Amazon could eventually win a market share of around $25-$50 billion of prescription drug market in the U.S. This estimate would mean that the pharmacy segment could account for more than 14% of the expected $173.89 billion Amazon revenues in 2017.

Can Amazon stock continue to rally?

With AMZN stock within striking distance of the $1000 mark, investors again have the same dilemma whether it will continue to rally and go past the psychologically important $1000 mark and sustain the gains. Back in September, Amazon stock went downhill after reaching the $999 mark, failing to break the resistance. However, the technical set up suggests things could be different this time. Amazon stock's recent resurgence has been largely supported by the technicals. Now, again the AMZN stock technical chart is flashing a bullish signal. In the last trading session, Amazon share price made a bullish crossover with its 100-day simple moving average (SMA). This is really a bullish sign since the 100-day SMA has acted as a strong support level for the most of 2017. The stock presently trades above all its moving averages, be it the 20-day, 50-day, 100-day or the 200-day SMA, which is also generally a bullish sign. Further, the stock is poised to make a bullish Moving Average Convergence Divergence (MACD) crossover as early as the next trading session, which is a popular momentum indicator used by technical traders. These bullish technical indicators suggest AMZN stock has strong momentum.AMZN Technical chart

To sum up, things are looking better for Amazon stock as technicals are falling in place. With profits coming under pressure in the last quarter earnings, investor sentiment has been little cold since then. However, still, a majority of Wall Street is bullish on Amazon and there is no dearth of bullish commentary about the stock. The latest bullish commentary came from Scott Galloway, a professor at NYU's Stern School of Business, suggesting that Amazon, and not Apple (NASDAQ:AAPL), will win the race to a $1 trillion market cap. Amazon stock still makes a great long-term buy, and the latest earnings could be crucial for Amazon stock to decide how fast the stock would head to new all-time highs. For the near-term outlook, investors are advised to follow the charts closely to make the most of the recent momentum in AMZN stock.

Looking for fundamentally better tech stocks? Check out Amigobulls' top stock picks from the tech sector, which has beaten the NASDAQ by nearly 155%. Interested in automotive stock? Then, we also have our top picks from the auto sector, which have beaten the S&P 500 by over 283%. If you're a trader though, you should check out our daily trading ideas section for daily, free updates on the latest crossovers and other popular technical signals.


Sreekanth Anasa Sreekanth Anasa   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