You may not be thinking Amazon (Amazon Stock Quote, Chart, News NASDAQ:AMZN) is a buy these days but be warned: no one wants to hear your complaining when the price shoots up and, once again, you didn’t buy AMZN when it was cheap.
That’s the sentiment from Josh Brown, CEO of Ritholtz Wealth Management, who says that if you play it right, there’s not much to lose on the name.
“It does not look great right now but it’s sitting just above historical support. This is where I would take a shot,” said Brown, speaking on CNBC’s Closing Bell on Wednesday.
“I would put a stop-loss in just below that support level, say $1660-$1670. You’re risking three to five per cent on the trade —you’re going to know if you’re wrong very quickly and you’ll be taken out of this trade with a very minor loss. But if you’re right and this thing heads back up toward the highs and it follows what we just saw with Alphabet, with Apple, with Microsoft, this is a good opportunity to buy it,” Brown says.
Amazon has had a spectacularly so-so year in 2019, which is saying a lot for a stock that has led the market for a number of years.
Where fellow tech giants like Microsoft and Apple are humming along as per their past records, Amazon is in a decided funk, posting gains over the first half of the year but sliding now since July and looking not at all like a stock ready to break out.
Multiple explanations have been floated, with considerable emphasis placed on market worries that the e-commerce behemoth is having trouble getting to its next growth stage. The company’s latest quarterly numbers, delivered in late October, were a case in point.
Amazon’s third quarter failed to impress with revenue that was above analysts’ expectations at $70 billion versus the consensus $68.8 billion, but investors focused on earnings which underwhelmed at $4.23 per share versus the expected $4.62 per share. Perhaps more problematic was management’s soft guidance for the traditionally strong fourth quarter, calling for revenue between $80 billion and $86.5 billion where the Street’s forecast was averaging $87.4 billion.
The earnings slip has been blamed on one-day shipping and the billions devoted over the past few quarters to get the infrastructure needed to carry out its plans, with management saying that another $1.5 billion would be devoted to infrastructure over the Q4 as well.
“There’s a lot of skepticism right now about whether or not Amazon is doing well against its competitors as it once was,” says Brown. “This is probably the first year in a long time that Amazon has had a sub-S&P 500 year-to-date return and yet look at the year-to-date return at Costco, at Walmart. These were left-for-dead names a year and a half ago and what a big turnaround we’ve seen.”
“I think that there’s an opportunity for the long side for a stock that you may have missed for a long while,” he says.