On Thursday, November 18, Amazon stock (AMZN) - Get Amazon.com, Inc. Report logged its best day of performance since early July 2021: up nearly 4% against an S&P 500 that headed only modestly higher. Now, AMZN is less than 2% below the $3,731 all-time highs of of July 8, which could be reached any moment now.
Today, the Amazon Maven presents the drivers of the recent rally – 9% in November alone – and discusses what AMZN investors might see happen next with this stock.
Why so bullish?
On Thursday, one key development may have been relevant enough to create $70 billion in market value for Amazon stock investors in a day. The cloud and e-commerce giant flexed its muscles against payment processing companies, including Visa (V) - Get Visa Inc. Class A Report, in a fight over credit card fees. Judging by the recent drop in V's market value, clearly Amazon is expected to come out a winner in this matchup.
Amazon's 20% ownership in Rivian Automotive (RIVN) - Get RIVIAN AUTOMOTIVE, INC. Report may have played a role in boosting AMZN's value as well. The EV maker priced its IPO at $78 per share in early November. The stock quickly doubled in price, valuing Amazon's stake at a very rich $20 billion compared to the $1 billion to $2 billion initial investment.
But I suspect that reinvigorated sentiment should be mainly credited for recent strength in Amazon stock. Shares have remained under pressure for long due to concerns over Amazon's ability to perform in this challenging 2021 holiday period that will be marked by (1) supply chain disruptions, (2) sharp decline in consumer confidence and (3) tough comps.
As the Amazon Maven argued recently, investors looking for a decent opportunity in AMZN should be looking past Q4 concerns and focusing on the long-term potential. I believe that the market has started to do just that.
What to expect of AMZN
I think that, within the mega-cap tech space, Amazon is one of the best bets for late 2021 and early 2022. The long-term business fundamentals remain solid, both in cloud and e-commerce. Digital sales suffered at the end of the pandemic, which I think only served to send certain momentum traders out the door and open an opportunity to buy the dip.
Source: Stock Rover
The chart above shows that AMZN has been the worst-performing FAAMG stock in 2021 so far. If for nothing but a bounce back to peer group average, not to mentioned slightly more de-risked 2022 earnings multiple of 65 times, I believe that Amazon stock has upside potential in the next several months.