Storm The Castle: Amazon.com (AMZN)

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified Amazon.com ( AMZN) as a "storm the castle" (crossing above the 200-day simple moving average on higher than normal relative volume) candidate. In addition to specific proprietary factors, Trade-Ideas identified Amazon.com as such a stock due to the following factors:

  • AMZN has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $805.6 million.
  • AMZN has traded 1.4 million shares today.
  • AMZN is trading at 1.56 times the normal volume for the stock at this time of day.
  • AMZN crossed above its 200-day simple moving average.

'Storm the Castle' stocks are worth watching because trading stocks that begin to experience a breakout can lead to potentially massive profits. Once psychological and technical resistance barriers like the 200-day moving average are breached on higher than normal relative volume, the stock is then free to find new buyers and momentum traders who can ultimately push the stock significantly higher. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize on. In the event of a well-timed trading opportunity, combining technical indicators with fundamental trends and a disciplined trading methodology should help you take the first steps towards investment success.

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More details on AMZN:

Amazon.com, Inc. operates as an online retailer in North America and internationally. The company operates in two segments, North America and International. AMZN has a PE ratio of 877.9. Currently there are 19 analysts that rate Amazon.com a buy, no analysts rate it a sell, and 10 rate it a hold.

The average volume for Amazon.com has been 3.7 million shares per day over the past 30 days. Amazon.com has a market cap of $158.2 billion and is part of the services sector and retail industry. The stock has a beta of 0.96 and a short float of 1.8% with 3.31 days to cover. Shares are down 15% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Amazon.com as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, weak operating cash flow and feeble growth in the company's earnings per share.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 7.3%. Since the same quarter one year prior, revenues rose by 23.1%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Although AMZN's debt-to-equity ratio of 0.29 is very low, it is currently higher than that of the industry average.
  • 36.46% is the gross profit margin for AMAZON.COM INC which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -0.65% trails the industry average.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Internet & Catalog Retail industry. The net income has significantly decreased by 1700.0% when compared to the same quarter one year ago, falling from -$7.00 million to -$126.00 million.
  • Net operating cash flow has declined marginally to $862.00 million or 2.04% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, AMAZON.COM INC has marginally lower results.

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