Amazon stock price surged to a record high this week, continuing a trend that has been going on for over two decades. AMZN soared to a record high of $235.5, giving it a market cap of over $2.45 trillion, making it the fourth-biggest company in the world after NVIDIA, Apple, and Microsoft. So, can the AMZN stock price continue soaring this year?
Amazon growth momentum continues
Amazon stock price has surged to a record high this year. This growth happened as its revenue jumped from over $280 billion in 2019 to $620 billion in the trailing twelve months (TTM).
The company has become highly profitably as its net profit rose from over $11.5 billion in 2019 to almost $50 billion in the TTM.
This growth happened as the company invested heavily on its retail and cloud computing business, where it is now the market leader.
The most recent results showed that Amazon’s net sales jumped by 11% in the third quarter to $158.9 billion. Most of this growth came from its cloud computing business, whose revenue rose by 19% to $27.5 billion.
It was followed by the international segment whose revenue rose by 12% to $35.9 billion and its North America business that made $95.5 bullion. As has been the case for a long time, while AWS makes the least amount of money in terms of revenue, it is the engine that powers Amazon.
Its operating income in the third quarter was $10.4 billion, higher than the North America and international segments, combined,
AMZN earnings next
The next important catalyst for the Amazon stock price will be its fourth-quarter and annual financial results on January 31st. These numbers will provide more information about how Amazon’s business did in Q4 and what to expect this year.
Amazon’s guidance was that its revenue would jump to between $181.5 billion and $188.5 billion this year or between 7% and 11% growth.
The average estimate of the 46 analysts that track the company is that its quarterly revenue will be $187.26 billion, bringing the full-year figure to over $637 billion. Amazon has a long history of beating the analyst estimates, meaning that its numbers will likely be better than expected.
The key catalyst for Amazon stock after earnings is usually its cloud computing business and whether it is continuing to grow.
At the same time, there are concerns about the company’s valuation since it is one of the most overvalued names in the Magnificent 7 group. It has a forward P/E ratio of 45.6, much higher than the sector median of 20. In contrast, Google stock has a forward P/E ratio of 25, while Microsoft has a multiple of 34.
Amazon stock price analysis
The monthly chart shows that the AMZN share price has been in a strong bullish trend this year. It has risen in the last five consecutive months. It jumped above the key resistance point at $188.70, its highest swing in November 2021.
The stock remains above all 50-month and 100-month moving averages. Also, the Relative Strength Index (RSI) has moved to the overbought point at 75. It is also nearing the extreme overshoot point at $250. Therefore, there is a likelihood that the stock will pull back as it moves towards mean reversion.
Mean reversion is a situation where a stock or a financial asset moves back to the averages. In this case, the stock will likely drop to the support at $188, and then resume the uptrend. This is known as a break-and-retest pattern, a popular continuation sign.
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