Amazon

Current Price: 3327.59 52 Week Range: 2871 – 3773

Prices closed 7% lower on Friday after the company’s quarterly results were announced. Fundamentals: Rev (2020): 386 B, Rev (1H 2021): 221.6 B, EPS (2020): 61.7, EPS (1H 2021): 30.91, PE: 53.8. While revenues grew 37% in 2020 compared to 2019 and EPS grew 168% between 2019 and 2020. The comparative growth rate has likely reduced this year.

Stock prices had consolidated between June 2020 and June 2021 in a price range of 2950 and 3350 (refer weekly chart) before breaking out of the pattern and rallying to its all-time high of 3773. This area is likely to be a support for the stock in the short term.

Prices are currently near term support of 3150 to 3200 (-5% from current levels). A definitive break below 2950 will be negative for the stock. On the upside, near term resistance for the stock at 3500 – 3550. A break above 3600 will be bullish for the stock. It is possible that the stock may consolidate in the range of 3150 and 3450 before the next move (whether up or down).

In May 2020, I had posted that BNP Paribas was a better buy than Amazon from a valuation and risk-reward perspective (website linkedin). Since then Amazon gained 63% to its all-time high while BNP Paribas gained 110% in the same period. At a PE of 53, the stock is still expensive and portfolio allocation should have a neutral weight rather than overweight.