Amazon.com (NASDAQ:AMZN) witnessed a surge in its stock price, reaching a 1-year peak in recent weeks, with a remarkable year-to-date gain of +67%. This rise can be attributed to a reinvigorated growth in profits and revenues. While Amazon’s value has climbed by +5% this month, notable tech giants like Apple (NASDAQ:AAPL), Alphabet (NASDAQ:GOOGL), Microsoft (NASDAQ:MSFT), and Nvidia (NASDAQ:NVDA) have experienced declines. However, some analysts are expressing reservations about the sustainability of Amazon’s rally, noting a potential lack of additional driving forces.
After touching a 3-1/4 year low in January, Amazon’s stock has been on an ascending trajectory, culminating in this month’s 1-year peak. Despite this surge, Ned Davis Research has pointed out a diminishing allure in the tech sector due to waning momentum, cautioning that the sector’s mega-cap vulnerabilities and valuations might lead to a potential downgrade. Bensignor Investment Strategies also chimed in, advising against entering new long positions while Amazon is trading at its highest point in a year.
Amazon, which lagged behind other mega-cap stocks over the past couple of years, staged a robust comeback in Q2 of this year, with the momentum sustained by the company’s cost-saving initiatives and indications of stabilization in its cloud business. Hedge funds displayed confidence in Amazon’s prospects, as per 13F filings gathered by Bloomberg, with 172 institutional investors increasing their positions in the second quarter, while 132 reduced their holdings.
Positive sentiment surrounding Amazon’s future earnings could play a role in prolonging the stock’s rally. Consensus estimates for Amazon’s net earnings in 2024 have climbed by over 20% within the past six months. The company’s earnings are projected to maintain a double-digit growth pace over the upcoming years. Although Amazon’s revenue growth slowed down last year, expectations point towards an acceleration. Nonetheless, the possibility of a global economic slowdown and rising interest rates cast a shadow on the sustainability of a tech stock rally.
Currently hovering around the $140 mark following its 1-year high of $143.63 earlier this month, Amazon’s stock remains approximately 24% below its record peak from July 2021. A breakthrough beyond this recent high could trigger further investment, potentially considered a bullish development. Bensignor Investment Strategies, however, advised a cautious approach, suggesting that waiting for confirmation of a breakout might be a more secure option than speculating on an immediate breakout.
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