Amazon Stock: Seesawing Through The First Half Of 2021

Half of 2021 is now gone. Today, the Amazon Maven reviews the wobbly performance of Amazon stock through the first six months of the year.
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The first six months of the year are now in the rearview mirror. After climbing 330% in the five years leading to the end of 2020, almost like a meme stock of sorts, Amazon shares  (AMZN) - Get Report had a less exciting first half of 2021: up “only” 6%.

The Amazon Maven reviews the stock’s year-to-date journey, which has been marked mostly by short bursts of rallies and pullbacks, not much by a clear trend higher or lower.

Figure 1: Amazon's logo.

Figure 1: Amazon's logo.

(Read more from the Amazon Maven: Amazon Stock Price: How It Can Climb Up To 30%)

Amazon’s first half numbers

Amazon stock’s performance in the first six months is depicted in the chart below, in blue. Notice how shares seesawed, climbing in March, April and June, but correcting in February and May. Below are also some interesting metrics on AMZN.

  • Absolute annualized return of 12%, well below the S&P 500’s annualized 33%.
  • Annualized volatility of 31%, a hair above its own historical average of 28% in the past decade.
  • Maximum drawdown of 13%, not bad compared to peers like Apple and other growth stocks.
  • Best month of returns: April, 12%
  • Worst month of returns: May, -7%
Figure 2: AMZN's annualized return vs. S&P 500.

Figure 2: AMZN's annualized return vs. S&P 500.

Not unlike some of its tech and growth peers, Amazon stock kicked off the new year in style. Shares rushed ahead of fourth quarter earnings, when the company stunned investors with one of the largest all-round beats in the company’s history.

Some could blame the announcement of celebrity founder Jeff Bezos’s retirement for the stock’s post-earnings selloff. AMZN share price declined 13%, the most so far in 2021, between earnings day and March 8. But I believe macroeconomic forces were the culprit here.

With the reopening of the economy and supply chain constraints that started to develop, the market began fearing rising inflation for the first time in many years. The 10-year government bond yield shot through the roof while Amazon stock fell apart. Cyclical sectors did much better than growth stocks.

The rebound in AMZN happened once yields stabilized in mid-March – and the recovery was fast and furious. Between March 8 and April 29, Amazon share price increased by a whopping 18%, nearly reaching September 2020 all-time highs.

Once Amazon’s monster second quarter earnings became old news, the stock started to head lower once again. Within only two weeks, AMZN had lost nearly 10% of its value compared to pre-earnings levels. The stock dipped into negative territory for the year.

From that second quarter low, Amazon shot almost straight up to its current price of $3,450. Renewed bullishness was possibly driven by valuations that became much more palatable – current-year P/E in the mid-60s, which is unusually low for Amazon standards – without a deterioration in fundamentals.

(Read more from the Amazon Maven: Amazon Stock: Get Ready For Earnings Season)

Twitter speaks

Amazon stock climbed over 300% in the five years leading to the end of 2020, then another (market-lagging) 6% in the first half of 2021. Do you think AMZN is overvalued?

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(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting The Amazon Maven)