Buy on the Pullback: Amazon.com
A stock that is on our constant watch list is Amazon.com Inc. (AMZN). Today AMZN hit a new low for 2013 of $252.62. Rather than argue about if Amazon.com is an expensive stock, you can't deny they are the future of retail and 'the cloud'. Betting against Amazon.com is like voting for Mitt Romney at this point. You can't win. Amazon is the internets, the end. However for the exercise of considering Amazon.com right now, let's get into it.
In a nutshell, Amazon.com shares appear to be oversold. Amazon is the 'safe' stock we are looking for to keep running in 2013 and beyond. Sure their P/E is too damn high (85 or so) and they have been downgraded in the past few weeks. That's a great opportunity as the stock has backed down 11% from its recent 12 month high.
Amazon Prime is catching on with consumers as is their video streaming app which is giving Netflix (NFLX) some actual competition. Growth is a concern and traders will not drive up AMZN if they think it's going to turn into a Microsoft (MSFT) or Apple (AAPL). Most of us are sick of hearing the comparisons between the three companies because anyone who uses Amazon.com knows how wonderful they really are.
Finviz.com has the average analyst price target on AMZN at $315. That implies a 22% return on investment in the next 12 months should you pick up AMZN today. Yes sellers upset about Amazon raising its fees but they will deal with it. Many people don't 'Google' products anymore, they go right to Amazon.com to start their search.
The risk with buying Amazon.com now is will their growth be good enough for Wall Street? Will that concern along with the fear that stocks have topped out in 2013 keep AMZN from reaching the $315 pt in the near future?
Mastery would be happy with a solid 15% gain for Amazon.com shares over the next 12 months. That's a fair and reasonable assessment given the success of Amazon Prime. Amazon Prime boasts 10 million users and $780 million in revenue. The company has to keep the Prime subscribers and continue to offer them the products at a cost that keeps them from going to Target (TGT) or Wal-Mart (WMT). That requires shareholders to have faith that Amazon can continue to do that. Now that the stock has fallen a bit, it's an advantageous time to place a long bet.
Amazon.com Inc (AMZN) shares have traded between $182.88 and $284.72 over the past 12 months. AMZN closed today at $256.41 and its shares are 11% below their 52-week high.
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