A Look at the Amazon Share Price: How Long until a Dip?

At time of writing, the share price of Amazon.com Inc [NASDAQ:AMZN] is trading at US$1,844.07, down 0.18%.

Today, we will be looking at the Amazon share price and its prospects.

Looking at the period from the December dip, you can see below the performance of the FAANG stocks (Facebook, Amazon, Apple, Netflix and Google) against the Dow Jones Industrial Average in red:

Amazon share price

Source: tradingview.com

All five of the FAANG stocks have outperformed the DJIA, with Facebook, Inc [NASDAQ:FB] (orange) and Netflix, Inc [NASDAQ:NFLX] (purple) the standouts.

Amazon (blue) has traded much like Alphabet Inc [NASDAQ:GOOGL] and Apple Inc [NASDAQ:AAPL].

Remember, these are blue chip stocks and tend to move with the market.

So in that case, what way will markets move?

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Big picture for Amazon share price has to do with the cycle

Many market commentators are screaming from the rooftops that a recession is imminent — because fear sells.

But this simply isn’t true. There are too many positive macro factors at play at this point in the cycle.

The Fed has paused the interest rate hikes, and may even move towards a cut before the end of the year.

Trump is pushing the Fed for a cut as he seeks to juice up the economy before an election.

Another key thing to be aware of is what is happening with the MSCI US REIT Index [NYSE:RMZ].

Its chart is much the same as the FAANGs, low in December and currently on track to hit a high not seen since mid-2016:

Amazon share price

Source: tradingview.com

An REIT is a real estate investment trust and the MSCI US REIT Index captures the performance of these rent-collecting organisations as a whole.

In the US, wages are up, employment is low, so the economy is strong and rents are consequently good.

Amazon dip may not happen until late 2019/early 2020

Bringing it back to Amazon then, the macro picture for them is thus largely sound.

Perhaps towards the tail end of the year, or the start of 2020, the picture may change a bit, with a mid-cycle slowdown in the offing.

But for the immediate future, it is hard to see the Amazon share price taking a major hit.

Yes, the company is currently trading at a lofty earnings multiple, but this is not particularly relevant. Amazon is a growing blue chip that moves with the market.

Transposing what we know about real estate onto the stock market, the picture becomes clearer.

Its next report on earnings will be sometime around the end of this month.

It has been trending up recently, and wage growth has occurred, so the early indications are that the report will be largely positive.

The market knows more than you do…always.

To conclude, I believe the Amazon share price has plenty of room to grow — it may even hit the highs of September of last year before the year is out — i.e. the US$2,000 range.

Regards,

Lachlann Tierney,
For Money Morning

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Lachlann Tierney is a writer for Money Morning and has been investing for nearly a decade. With an MSc from the London School of Economics, he brings a sound understanding of global markets to his writing. Lachlann is interested in emerging technologies, energy solutions and helping people invest their money wisely. Recently, he has been working with Phil Anderson and Terence Duffy. They have three publications:

Phil Anderson’s Time Trader
Cycles, Trends & Forecasts
Money Morning Trader


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