Amazon is a must-own stock for 2019, this investor says

Amazon (Amazon Stock Quote, Chart NASDAQ:AMZN) has done well to break out of its downward trend over Q4 of last year. The stock has now risen more than 18 per cent since the start of January, and looks to be headed higher.

So says portfolio manager Mike Newton, director of wealth management at Scotia Wealth, who thinks the stock is a buy.

“Amazon is still below its highs. When it was toiling around in trouble and it broke out there, that was the time to buy. Even if you had bought it at $1500, here the backwards check mark comes into play,” Newton says, in conversation with BNN Bloomberg on Thursday.

“It’s technically in really good shape and breaking out,” he says.

Amazon famously slipped into the trillion-dollar club last summer when its share price rose above $2,000 over August and September. Then came October when all of the tech names got sold off, notably including the FAANG stocks who all suffered losses well into the double digits.

But like the market in general, tech names have bounced back in 2019. Year-to-date, Facebook is now up 27 per cent, Apple is up 20 per cent, Alphabet is up 12 per cent and Netflix is up 33 per cent.

Amazon’s stock stumbled briefly at the start of February as investors reacted to the e-commerce giant’s quarterly earnings, delivered on January 31, which nonetheless beat consensus estimates for both revenue and earnings. The company’s fourth quarter featured revenue of $72.4 billion versus the consensus expectation of $71.9 billion and its EPS was $6.04 per share versus the Street’s $5.68 estimate. Management said there’d be increased spending over 2019 across hiring and capital expenditures, however, following on a slower investment period in 2018.

Newton says that Amazon’s potential has yet to be fully grasped.

“I think Amazon is a phenomenal company. I think they’re moving at a speed that nobody understands. The sheer volume — when they grow at two per cent that’s a massive volume and they’re growing at two per cent a week,” he says.

“It’s on the riskier side of the ledger but I would be buying it right now,” Newton says.

Disclosure: Cantech Letter Editor Nick Waddell owns shares of Amazon