A 4% pop yesterday put Amazon.com Inc (NASDAQ: AMZN) shares at a new record high and on the verge of a major milestone. After closing at $193.61, they're just a 3% move away from hitting $200 for the first time ever. It also means that they're now up more than 30% since the start of the year and over 130% since the beginning of last year, which is when this current rally really started.
A combination of cooling inflation, rising hopes for interest rate cuts, and the explosion of artificial intelligence (AI) in recent months have made prime conditions for Amazon stock. Less inflation means the tech titan's e-commerce consumers have more disposable income to spend, while the possibility of a fall in rates means their tech customers are increasing their cloud computing budgets. The whole AI angle should speak for itself, but for now, it's safe to say that Amazon has emerged as one of the leading players and is staking a claim to a decent amount of market share.
For those of us on the sidelines, though, who've missed out on the multi-month run so far, there are reasons to still be excited. Those tailwinds mentioned above are still in play, and we're inclined to think that every day Amazon spends under $200 is a screaming buy opportunity. Here are three more reasons why.
Amazon Stock's Impressive Fundamental Strength
Amazon's next earnings report is due in the last week of July, and the stock is likely to rally up to that as investors get into position. The company's last report, which came out at the end of April, smashed analyst expectations across both headline numbers and sent the stock soaring.
Excluding the holiday quarters, which Amazon always has the best, it was Amazon's highest quarterly revenue print ever and its most profitable. Considering the stock has only just recovered from the 50% hammering it took through 2022, it's in a great position.
From a valuation perspective, a price-to-earnings (PE) ratio of just 54 compares favorably to where it was during 2022's crash. Sure, the macro-environment was different then, but Amazon at the time had a PE ratio of more than 100. Considering this has now been halved, while the stock has more than doubled simultaneously, you can't help but feel the valuation is quite attractive.
Multiple Analysts Label Amazon With a Buy Rating
The second reason to remain bullish on Amazon is the sheer number of analysts in the bull's camp. This week alone, the team at Bank of America reiterated their Buy rating while boosting their price target to $220, and Robert W. Baird did the same last week.
In fact, you would have to go back to last August to find an analyst update that didn't call Amazon a Buy and back to November to find a refreshed price target that was less than $200. This makes it all the more unusual that Amazon has yet to tick that one off the list, though, as we mentioned above, it's surely only a matter of days away.
Amazon's RSI: Delivering More Room to Run
The final reason to be excited about Amazon's potential is the strength of the stock's technical setup. Even with all the recent rallying and last night's record close, the stock's relative strength index (RSI) is still only at 65.
For context, the RSI measures how oversold or overbought a stock is. A reading below 30 suggests the former, while a reading above 70 suggests the latter. So, with a reading of 65, Amazon is definitely on the warm side but still has a ton of room to run before anyone could call it frothy.
Investors should look for shares to close above $200 in the coming days, as this will confirm the breakout and set the stage for the next rally phase to begin.
