Amazon ( AMZN - Get Report) is an overly valued name, currently trading at 90x forward-looking earnings and something like 230x trailing earnings. You may recall that several months ago, I placed an $1850 price target on AMZN. The high yesterday was $1841.95. Perhaps I should have jumped the gun, taken my ball and gone home. After all, the Netflix-related ( NFLX - Get Report) negativity was not the only thing that impacted AMZN on Monday. The firm's highly promoted "Prime Day" got off to a very embarrassing start that made the website unavailable to many shoppers. This will undoubtedly hurt the metrics that support performance success.
On top of that comes news that Amazon's key retailing rival Walmart (WMT - Get Report) , and key cloud services rival Microsoft (MSFT - Get Report) , have decided to dance to the next song (five years) together. Walmart will rely upon Microsoft for machine learning, artificial intelligence, and sales data sharing with vendors. If you have not yet caught on, Microsoft's "Azure" is considered a significant alternative to Amazon Web Services, particularly across the retail space, as that group plays catch up to Amazon's expertise in, and broad use of, data. AMZN and MSFT are Action Alerts Plus holdings.
In my opinion, though seemingly over-valued and having to overcome that troubled start to "Prime Day," Amazon is skating on thicker ice than was NFLX. Money Flow, the daily MACD and Relative Strength all look good. You may see some weakness. Many of you have much lower basis points, and I get that it can be tough to add at levels that increase one's average cost. I would need to see a serious setback for this name to increase my long. My new plan:
Target Price: $1950 (up from $1850)
Replenishment Point: $1660 (initiation)
Panic Point: $1540 (up from $1350)
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