Amazon Stock: Should You Buy It In August?

Amazon stock bounced around in July, ending the month on a bad note. Could August be a better month to hold shares?
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Another month has come to an end. In July, Amazon stock  (AMZN) - Get Amazon.com, Inc. Report bounced off the walls: up sharply through July 13, on the back of a market-wide rebound in growth and tech; then back to negative territory for the month, following the company’s disappointing earnings report.

Where does that leave us? Is now a good time to buy AMZN and hold the stock through August at least?

Figure 1: AMZN monthly chart

Figure 1: AMZN monthly chart

(Read more from the Amazon Maven: Amazon Stock: 3 Key Takeaways From Q2 2021 Earnings)

AMZN: lost momentum vs. dip buying

Amazon’s recent earnings report will likely dictate the pace of the stock, at least during the first week or two of August. On one hand, momentum traders will likely want to keep some distance from AMZN, now that e-commerce is expected to decelerate in a post-pandemic environment – this is not me saying it, but Amazon’s own management team during the earnings call.

On the other hand, investors might want to take advantage of the dip to accumulate shares. The Amazon Maven has published its research on the best time to buy Amazon, and the evidence is clear: doing so after pullbacks tends to result in better forward one-year returns. See chart below.

Figure 2: Median one-year return on AMZN.

Figure 2: Median one-year return on AMZN.

AMZN: catalysts

I tend to side with the bulls on the idea of buying dips in Amazon and holding it for the long term. After all, despite Q2 results that failed to inspire, the multi-year growth story in e-commerce, cloud, digital entertainment, consumer products and advertising remains intact, in my view.

But the above will likely have little to do with how AMZN behaves in the immediate term. In addition to bruised investor sentiment and loss of momentum, I fear that Amazon will undergo a period of few catalysts to support the stock – namely the few-month gap between Prime Day and the holiday season.

The chart below helps to illustrate the point. Notice that, over the past ten years, Amazon stock has generally lost steam against the S&P 500 as the year unwinds, after usually outperforming the benchmark by quite a bit in the first half of the year.

Beyond mere coincidence, I believe that this is a reflection of enthusiasm in the spring giving way to “sell the news” pressures in the fall. This time, muted Q2 earnings could pull forward AMZN’s relative underperformance from the holiday quarter to August and September. Time will tell.

Figure 3: Average monthly return (seasonality).

Figure 3: Average monthly return (seasonality).

(Read more form Amazon Maven: Live Blog For Amazon Stock Investors: Q2 2021 Earnings)

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Take your best guess: how do you believe Amazon stock price will move in August?

Is the price right?

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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)