Key points
- Amazon’s domestic sales rose in the first quarter and could continue to grow, with shares near record levels.
- Institutions are buying the stock and supporting a market rally.
- Analysts are raising their price targets and see this stock at a new record high.
It is not unusual for insiders to sell Amazon.com (NASDAQ: AMZN) action. Insiders own a large 12% stake in the company, and share-based compensation is a factor, but there was some unusual activity this quarter. Inside sales rose to a multi-year high as eight insiders turned to sales.
The selling is probably meaningless in the grand scheme of things, opportunistic profit taking with shares near record levels, but the spike is notable for the volume of the business scope. Insiders, including Amazon founder Jeff Bezos, CEO Andrew Jassy, Worldwide Amazon Stores CEO Douglass Herrington, AWS CEO Adam Selipsky and several directors, made sales. Overall there have been 20 sales in the last 90 days and it is expected that, at least, Bezos will continue to sell. A recent statement was revealed allowing him to sell more than 5% of his holdings before next year.
Institutions and analysts are buying Amazon shares
Sales activity at Amazon is conducive to rising stock prices. Institutions own 57% of the company and have bought on the balance sheet for three consecutive quarters. Their business is led by fund giants Vanguard and BlackRock and will hit a multi-year high in the first quarter of 2024. Bezos remains the largest shareholder with nearly 10% of the shares, followed by Vanguard’s 7.4% and 4.6% by BlackRock. The acceleration in institutional activity coincides with a rally in stock prices and supports the market.
Analyst activity also supports Amazon’s marketplace. Analyst revisions over the past four quarters have increased the consensus rating to Buy from Moderate Buy and the price target by 36% over the past year. The consensus of $197 leads the market by 13% and is driven higher by revisions. The most recent targets call for the stock to trade with a low near the current consensus and a 30% upside at the high end of the range.
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Wells Fargo, which has an Overweight rating and a $211 price target, is seeking new fees to drive growth and margin. Adjustments to FBA or fees met by Amazon are believed to add $5.2 in annualized revenue, about 80 basis points of growth in the first year, and widen the margin by 100 basis points. The government is reviewing the new fee structure, but it is not expected to block the move.
Amazon will report first-quarter earnings on April 26
Amazon is expected to report earnings on April 26. There is a risk that analysts have raised the bar because forty-four of the forty-five revisions in the last ninety days are bullish, but analysts may still be underestimating the business. The consensus expects revenue growth to slow to 12% from 14% last quarter, the first sequential slowdown in more than a year. As growth is supported by resilient consumer demand and growing demand for AI in AWS, the company will likely beat estimates. Amazon beats estimates 100% of the time in F2023.
Price action on Amazon is favorable. The stock corrected itself in 2022 and 2023, bottomed and reversed in a head and shoulders that now has the market near record highs. The latest action is a consolidation within the rally which suggests a move to new highs is possible.
A move to the analyst consensus of $197 would set a new high and open the door for a sustained rally in the second half of 2024. In such a scenario, this market could advance from the $180 level by an amount equal to the magnitude of the price. previous price range. That range is worth more than $100 or about 125%, placing Amazon’s target range between $280 and $405.
The risk is that new highs are not reached. In this scenario, resistance at all-time highs will limit gains and bring the market back to more reasonable levels. Amazon is doing well, but 42X earnings are high for any blue-chip technology.
Companies in this article:
| Agency | Current price | Price change | Dividend yield | P/E ratio | Consensus assessment | Consensus price target |
|---|---|---|---|---|---|---|
| Amazon.it (AMZN) | $174.68 | +0.1% | N/A | 60.23 | Acquire | $197.95 |
Experience
Thomas Hughes has been working with InsiderTrades.com since 2019.
Areas of expertise
Technical Analysis, S&P 500; retail, consumer goods, consumer staples, dividends, high yield, small cap, technology, economic data, oil, cryptocurrencies
Education
Associate of Arts in Culinary Technology
Past experience
Market observer, trader and investor for numerous websites. Founded Passive Market Intelligence LLC to provide market research insights.