Image Source: Unsplash
 

Amazon (Nasdaq: AMZN) remains one of the most closely watched stocks in the market. Known for its dominance in e-commerce and cloud computing, Amazon's stock price has seen significant volatility over the years, influenced by factors such as earnings reports, macroeconomic conditions, and consumer spending trends. 

Investors frequently analyze Amazon stock price movements to measure market sentiment and assess future growth potential.
 

About Amazon Company

A Brief History of Amazon

Founded in 1994 by Jeff Bezos, Amazon started as an online bookstore before expanding into various product categories, ultimately becoming the world’s largest online retailer. Over the years, the company has grown through acquisitions, innovation, and diversification into cloud computing, entertainment, and artificial intelligence. Today, Amazon is a global technology giant that impacts multiple industries beyond retail.

Amazon's Business Model and Revenue Streams

Amazon operates through several key business segments:

• E-commerce: Online retail sales, including third-party seller services.
• Amazon Web Services (AWS): A dominant player in the cloud computing industry.
• Advertising: Growing ad revenue through its marketplace and streaming services.
• Subscription Services: Prime memberships and digital streaming.
• Physical Stores: Whole Foods and Amazon Fresh locations.

This diversified revenue model enables Amazon to maintain steady growth despite economic uncertainties. Investors tracking Amazon stocks often consider how these revenue streams contribute to its valuation and long-term potential.
 

Amazon's Competitive Advantage and Industry Positioning

Amazon’s competitive edge lies in its expansive logistics network, technology-driven efficiencies, and strong brand loyalty. Its vast customer base and integration of AI-driven recommendations enhance its ability to generate consistent revenue. Additionally, AWS maintains a leading market share in cloud computing, competing with Microsoft Azure and Google Cloud.

Amazon’s positioning as an industry leader in multiple sectors makes it an attractive investment option. Many investors considering Amazon stocks analyze these strengths to determine future market potential and profitability.
 

Amazon Stock CFDs

What Are Stock CFDs?

Contracts for Difference (CFDs) allow traders to speculate on stock price movements without owning the underlying shares. Amazon stock CFDs enable you to take advantage of both rising and falling prices, offering flexibility in volatile market conditions. Amazon stock trading on an American stock exchange online platform provides access to leverage, enabling greater exposure with a smaller initial investment.
 

Amazon Fundamental Analysis
 

1. Basic Financial Checks: Earnings & Cash Flow

Amazon (AMZN) has demonstrated positive earnings and consistent cash flow from operations over the past year, a sign of stable financial performance. Over the past five years, AMZN has reported positive earnings in four of those years, reinforcing its ability to generate profits. Additionally, the company has maintained a steady cash flow from operations, indicating that its core business activities continue to support its financial position.
 

2. Ratios: Profitability and Margins

When evaluating Amazon’s profitability, several key ratios stand out. The Return on Assets (ROA) of 9.48% is higher than 80.65% of its peers, suggesting that AMZN is efficiently using its assets to generate profits. Its Return on Equity (ROE) of 20.72% outperforms 67.74% of its industry competitors, highlighting effective management in generating profits from shareholder equity. The Return on Invested Capital (ROIC) of 12.89% shows an improvement over the previous 3-year average of 8.32%, signaling increased efficiency in generating returns from invested capital.

Amazon’s profit margins are also notable. With a profit margin of 9.29%, AMZN outperforms 87.10% of its peers, indicating strong profitability. The operating margin of 10.75% outperforms 74.19% of competitors, showcasing solid operational efficiency. Additionally, the company’s gross margin of 48.85% surpasses 67.74% of industry peers, suggesting that Amazon is consistently able to maintain favorable pricing and cost control.
 

3. Health: Solvency and Liquidity

In terms of solvency, Amazon shows low risk of bankruptcy, with an Altman-Z score of 6.06, well above the threshold for financial distress. The company’s debt-to-equity ratio of 0.24 reflects a low reliance on debt to finance its operations, a positive sign of financial stability. The debt-to-free-cash-flow (FCF) ratio of 2.31 suggests that Amazon could cover its debt in about 2.31 years, further demonstrating a solid financial position.

However, Amazon’s liquidity ratios present a mixed picture. The current ratio of 1.06 and quick ratio of 0.87 both fall below industry standards, which might suggest potential challenges in meeting short-term obligations. While this does not indicate immediate liquidity issues, it is something to monitor for the company’s ability to cover short-term liabilities.
 

4. Growth: Past and Future Performance

Amazon has experienced strong growth in recent years, with a year-over-year (YoY) earnings per share (EPS) growth of 90.69%, demonstrating its ability to generate increasing profits. Revenue growth of 10.99% YoY shows healthy expansion in the company’s top line. Looking ahead, Amazon's projected EPS growth of 19.78% over the next five years signals continued strong profitability. Its projected revenue growth of 10.12% over the same period, while solid, is slightly below its historical growth rate, but still indicates positive future expectations.
 

5. Valuation: Current and Forward Outlook

Amazon’s valuation presents some challenges when compared to its industry and the broader S&P 500. The price-to-earnings (P/E) ratio of 41.44 suggests that the stock is currently expensive. This is further supported by the PEG ratio of 2.79, which indicates that the current P/E ratio may not be fully justified by growth expectations, implying that AMZN’s stock price may be overvalued relative to its future earnings. However, the forward P/E ratio of 36.07 suggests that the stock may be priced more reasonably when considering future earnings, providing some relief for investors looking at future valuation.
 

6. Dividend

Amazon does not currently pay any dividends, choosing instead to reinvest its profits into further growth. While this means shareholders do not receive a direct return in the form of dividends, the focus on reinvestment aligns with the company's long-term growth strategy, particularly in expanding its business operations and innovation.

AMZN shows strong profitability and growth potential with robust margins and improving financial health. However, its valuation appears expensive, particularly in relation to its growth rate, and the company lacks a dividend policy. Investors may need to assess the trade-off between AMZN’s future growth prospects and its current premium valuation.
 

Amazon Stock Technical Analysis 

(Click on image to enlarge)

Support Levels

Support Zone: 220.40 - 225.95- This zone is formed by the confluence of trend lines and moving averages 20MA and 50MA. The convergence of these indicators suggests that buyers have been active in this region, making it a potential area where the price may find support if it retraces.

Support Zone: 216.32 - 220.00- Similar to the first zone, this support area is validated by trend line and moving averages as well. This suggests that a pullback to this region could trigger buying interest.

(Click on image to enlarge)

Support 192.45 - This support level is identified using a trend line on the weekly time frame. Given its derivation from a higher time frame, this level is likely to hold more weight over the longer term. A breach below 192.45 might indicate a shift in the overall trend.
 

Resistance Level

Resistance 242.00 - This key resistance is marked by a horizontal line on the daily time frame. It suggests a strong barrier where selling pressure will increase. A breakout above 242.00 could signal a shift in market sentiment, while failure to sustain above this level might lead to a retracement.

Traders should consider these confluences, we talked about above, when planning entry or exit points.

• The weekly support at 192.45 may be more relevant for long-term traders, whereas the daily resistance at 242.00 and the other support zones can be useful for shorter-term trading strategies.
• A sustained move above the 242.00 resistance could open up further upside potential, especially if accompanied by increased volume and momentum.
• A breakdown below the key support zones (especially the one on the weekly time frame at 192.45) could indicate further downside, prompting traders to consider risk management strategies.

More By This Author:

6 Financial Stocks To Watch In 2025
Tesla Stock Price And Company Overview
Gold Trading Strategies: Long-Term Vs. Short-Term Approaches