Amazon (AMZN) ‘s massive growth spurt during the pandemic was followed by a sharp slump. Now, the tech giant is fighting its way back to sustained growth and profitability for its $1.3 trillion internet empire. As of market open Nov. 6, Amazon stock has gained 65% this year after losing 49% in 2022.

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To get back on the growth lane, Amazon is boosting its efforts in generative artificial intelligence and fending off challengers in e-commerce. But it is also staring down a major battle with the U.S. government.

Meanwhile, a third-quarter earnings report that beat expectations gave Amazon shares a big boost in recent trading, with Amazon stock up 16% since the Oct. 26 report. Notably, AMZN stock is showing a bullish “Blue Dot” signal in its performance compared to other stocks.

So, is Amazon stock a buy? Here’s what to know about recent action from the tech giant’s AMZN stock.

Amazon Stock Jumps After Q3 Earnings

For the quarter ending in September, Amazon reported adjusted earnings of 94 cents a share. Revenue increased 13% year over year to $143.1 billion.

Meanwhile, analysts expected Amazon to post adjusted earnings of 59 cents per share on revenue of $141.5 billion, according to estimates tallied by FactSet.

Amazon stock climbed by nearly 8% in trading following the report, which Amazon published on Oct. 26. 

According to William Blair analyst Dylan Carden, “Amazon handily beat sales and earnings expectations for the third quarter, with double-digit upside across all three primary business segments and substantial improvement in operating income growth.”

E-commerce sales were up 7% to $57.3 billion. Wall Street analysts projected sales of $56.97 billion.

Meanwhile, the e-commerce giant collected $34.3 billion from third-party sellers, compared to analyst projections of $33.4 billion.

Company officials noted that efforts to streamline its e-commerce fulfilment network are showing benefits.

Operating income increased to $11.2 billion in the third quarter, compared with $2.5 billion for the same period last year. Cost-cutting contributed to that number, including significant layoffs.

Amazon Stock: Why Investors Are Closely Watching AWS

One potential concern from the earnings report: the company’s cloud business missed revenue estimates.

Amazon Web Services posted a 12% year-over-year sales increase to $23.1 billion, while analysts were expecting sales of $23.2 billion.

AWS doesn’t have the same name recognition as the Amazon.com retail business. But it is a key profit driver for the company and watched closely on Wall Street.

Notably, a revenue miss for Google’s cloud business sank shares for Alphabet (GOOG) that same week.

But earnings call commentary from Chief Executive Andy Jassy seemed to settle antsy investors.

Jassy, who led AWS before taking over as Amazon CEO, acknowledged that companies were still undertaking “cost optimizations” to lower their cloud software spending. Revenue growth for the third quarter was much slower than the 27.5% year over year jump in the third quarter of 2022.

But Jassy noted that deal-making for AWS had picked up in September and October.

“Companies have moved more slowly in an uncertain economy in 2023 to complete deals,” Jassy said. “But we’re seeing the pace and volume of closed deals pick up. We’re encouraged by the strong last couple of months in new deals signed.”

Further, the business topped profit estimates. Q3 operating income for AWS jumped 29% year over year to $6.98 billion, ahead of Wall Street estimates of $5.6 billion.

Generative AI: Amazon vs. Microsoft

Also worth watching for Amazon stock: the company’s big artificial intelligence play.

Microsoft (MSFT) the No. 2 cloud services provider behind AWS, raced out to an early lead in adopting generative AI, now the hot tech trend that’s expected to shake up the battle for dominance in the cloud and the enterprise tech market in general.

Just weeks after ChatGPT was introduced, triggering the ongoing AI frenzy, Microsoft agreed in January to invest $10 billion as part of a strategic partnership with OpenAI, the startup behind the wildly successful chatbot that unleased the ongoing AI frenzy.

Microsoft stock jumped after earnings on Oct. 24 showed strong revenue growth for its Azure cloud-computing business. The company credited the results, in part, to clients adopting generative AI tools.

Amazon Stock: AI Progress

In response, Jassy spent significant time on the 3Q earnings call highlighting Amazon’s progress in building AI products for its cloud clients. He said he was “surprised” by the company’s AI uptake.

Moreover,  he highlighted companies such as Booking.com (BKNG), GoDaddy (GDDY) and United Airlines (UAL)using AWS to build generative AI products.

“In our best estimation, the amount of growth we’re seeing and the absolute amount of generative AI business we’re seeing compares very favorably with anything else I’ve seen externally,” Jassy said.

Amazon struck a deal in September to invest up to $4 billion in Anthropic, a rival to ChatGPT-creator OpenAI. Further, Amazon in April launched Amazon Bedrock, a service that allows users of Amazon’s AWS to build generative AI applications.

“We view AWS stability in 3Q as a better-than-feared outcome and believe investor expectations had migrated below consensus ahead of results,” wrote Wedbush analyst Scott Devitt in a note Oct. 27. “Management commentary regarding AWS was upbeat in our view and suggested a strong customer pipeline ahead in addition to $10B+ of potential AWS revenue stemming from AI over the next several years.”

Will Regulators Take A Bite Out Of Amazon Stock?

Beyond earnings, Amazon is starting down what is likely the biggest legal fight in its 30-year history. Regulators are challenging Amazon’s market power and the company likely will grapple with intense scrutiny in the coming years.

Amazon’s regulatory problems came into sharp focus on Sep. 26 when the Federal Trade Commission and 17 state attorney general filed a massive antitrust lawsuit against Amazon.

The FTC accuses the company of using its market power to inflate prices and overcharge merchants. Amazon rejects the allegations, arguing that the FTC is “wrong on the facts and the law, and we look forward to making that case in court,” as the company said in statement.

AMZN stock fell 4% the day the suit was filed.

Still, the FTC’s legal challenge has not shifted Wall Street’s view of the Amazon. Of the 56 Amazon stock analysts following the company, 96% hold a buy rating, according to FactSet.

In an Oct. 3 client note, JPMorgan analyst Doug Anmuth said the lawsuit “was very much as expected, and we believe it will be challenging to prove that AMZN illegally maintains monopoly power.”

But Amazon could be facing antitrust scrutiny overseas. The U.K’s top media regulator announced Oct. 5 that the country will investigate the dominance of Amazon and Microsoft in the cloud-services market.

What About E-Commerce Spending?

Even Amazon’s “Everything Store” is not immune from macro concerns about consumer spending. Amazon posted a 1% sales decline last year within its online stores category, after 37% and 21% growth in 2020 and 2021

Sales have bounced back this year. The company’s direct online sales category recorded $161 billion in revenue through the first nine months of 2023, up 4% from the same period last year.

However, the midpoint of Amazon’s fourth quarter revenue guidance was short of Wall Street’s expectations—$163.5 billion vs. $167.1 billion. That comes during the important holiday shopping season for the company.

Sales were strong for essential items but slower for big purchases.

“We still see customers remaining cautious about price, trading down where they can and seeking out deals, coupled with lower spending on discretionary items,” said Chief Financial Officer Brian Olsavsky on the 3Q earnings call.

Still, improvements to Amazon’s overall operations could override those concerns, in the view of some analysts.

William Blair’s Carden, for instance, noted the risk for consumer demand. But, he added, “Between an increasingly more positive outlook for AWS (at already improved margin), continued upside to North America segment margins, and improving margin outlook even in international markets, (Amazon’s) valuation is becoming increasingly harder to ignore.”

Amazon Vs Temu

There is growing concern that Amazon is threatened by low-cost competitors selling Chinese goods, namely PDD Holdings’ (PDD) Temu and the privately-held Shein.

But a Goldman Sachs report on Oct. 12 questioned that assumption. The report noted that third-party data indicates Temu shoppers have greater overlap with discount retailers and dollar-stores than Amazon.

“This remains consistent with our view that Temu likely has a lower overlap with platforms with stronger ecosystems (such as Amazon Prime households) and higher-income cohorts and that Temu is also likely capturing share from offline channels,” wrote Goldman Sachs analyst Eric Sheridan.”

Is Advertising Amazon’s Next Big Hit?

While Google and Facebook-parent Meta (META) have long dominated the digital ad market, Amazon has emerged as a major competitor.

Ad sales marked Amazon’s fastest-growing business line for the third-quarter. The company raked in $12.1 billion in ad revenue, up 26% from the same period last year. Analysts were looking for $11.6 billion.

The sales put the business on pace for $46.5 billion in ad sales for the year, according to analyst estimates, up 23%.

“While we see companies being more cautious on the ads side and the top-of-funnel products, things like display and a little bit of video, we’re still seeing a lot of strength in the lower-funnel ad products like sponsored products,” Jassy said.

Jassy also highlighted how the company is utilizing AI to make ads more effective.

Technical Analysis Of Amazon Stock

Amazon stock’s technical ratings improved after its earnings report, following a rough September.

Notably, Amazon stock has a “Blue Dot” on its Relative Strength line, according to its IBD MarketSmith weekly chart. Relative Strength measures a stock performance compared to the rest of the market. The bullish RS Line Blue Dot identifies stocks whose relative strength lines are hitting new highs, while the stock is building a new base or breaking out past a buy point.

AMZN stock is currently in a cup pattern with a buy point of 145.86.

Shares currently have an IBD Relative Strength Rating of 94 out of a best-possible 99, indicating the stock is outperforming much of the market this year.

Amazon stock also holds an IBD Composite Rating of 88 out of 99. The best growth stocks have a Composite Rating of 90 or better, according to IBD Stock Checkup.

Further, Amazon stock holds an Accumulation/Distribution Rating of B-. That rating analyzes price and volume changes in institutional ownership for a stock over the past 13 weeks. The current rating indicates more buying than selling.

Here is a guide to understanding IBD’s rating system.

Amazon Market Cap

You can check for Amazon’s current stock price here. Amazon’s market cap is $1.43 trillion, as of market open Nov. 6. Here is how the stock has grown over time:

Time Period AMZN Stock % Gain S&P 500 % Gain
Year To Date 65 13.51
Prior Year -49.62 -19.44
Prior 3 Years (2019 — 2022) 13.67 54.46
Prior 10 Years (2012-2022) 94,622 203.44
Since 1997 Amazon IPO 153,900 425

*Prices as of market open Nov. 6.



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