Amazon: A Diversified Juggernaut
Amazon (AMZN) is a household name. We all have Prime for shopping, videos, music, books and more. And in every practical sense, this is a consumer discretionary stock.
That may be set to change.
Because this week, the company just made a major announcement that further extends the company from the shopping platform we all know and love, to further entangle its operations an essential fabric of infrastructure for America’s businesses with the launch of supply chain services.
This may not sound like a big deal on the surface, but just ask stock holders of FedEx and United Parcel Services if this is a big deal or not. Those stocks immediately sunk on the news, dropping 9.1% and 10.5%, respectively. Amazon is only up 1.4% on the news.
So for today, let’s focus on what this means as Amazon unlocks yet another avenue for growth and profits.
Amazon's Supply Chain Push Was Inevitable
I feel like we all knew it was just a matter of time.
When they initially took over their own logistics, due to the amount of money they were sending FedEx and UPS for their online shopping platform, it seemed inevitable. Even still, this came as a shock to investors.
Maybe that’s because of everything Amazon is already juggling under one roof. If you read their earnings report, you wouldn’t know what to make of everything they announce. Take a look:
Five new “launched” items, plus several “announced”, “added”, and “introduced.” This is a typical announcement and is only a portion of the announcements and launches in Q1.
So, five days later when the company announced Supply Chain Services was launching, it is just another day for the company with rolling out new features and platforms.
But, as we saw in FDX and UPS, this one is different.
Supply Chain Services is Already Live
It’s more than the typical announcement like we saw in Q1, that they are going to offer this service, or that they are planning on rolling it out. This platform is already live. You can view all the details and register your company right now.
On the first Monday of May, the company unveiled an entire new business model for one of their divisions with a legitimate roll out on the spot.
And investors acted like they didn’t notice.
Maybe that’s because the stock is up 25% in the month of April, just before this news broke.
Amazon Daily Chart, Sigmanomics
That move, plus the new announcement on Monday, is very bullish for the stock.
New all time highs after a strong Q1 earnings report. I used to joke, as a technical analyst, when someone asks what’s the best buy signal, I would say fresh all-time highs. If you think about it, nothing is more bullish than that. And that’s right where Amazon is trading today.
When you combine new highs, with a new business opportunity in a juggernaut like Amazon, it provides plenty of headroom above the current prices for investors to chase from here.
Earnings Beats and a New Revenue Driver
The supply chain services business is going to impact revenue and earnings in the coming years. But, with Q1 earnings announced before this news, the data we have right now doesn’t even price it in. And it’s still one of its key strengths as a stock – robust revenue and earnings growth.
Amazon has beat earnings three out of the last four quarters, with its strongest beat coming in Q1, on the back of a 17% increase in sales.
Revenue for the coming years is on a strong and steady climb that the new supply chain services business will only add too.
A quick snippet from Q1 highlights: “AWS is growing 28% (our fastest growth in 15 quarters) on a very large base, our chips business topped a $20 billion revenue run rate (growing triple digits year-over-year), Advertising grew to over $70 billion in TTM revenue, and unit growth in our Stores reached 15% (the highest since the tail end of covid lockdowns).”
Again, the company just unlocked a new revenue driver that will scale up from here.
If you were looking for an opportunity to jump in on Amazon, this is the perfect time. Fresh new highs and a brand new revenue driver are exciting additions to a stock that is already firing on all cylinders.
And if you needed another nudge, the Sigmanomics forecasts are flashing two out of three zones with bullish bias.
Sigmanomics Insights: Forecasting a Bullish Bias
Based on three different forecasting time frames, the 7-day forecast, 14 day forecast and 28 day forecast, the stock is on the cusp of an all out buy signal.
Right now, we are seeing just two out of three zones with bullish bias.
This proprietary forecast from Sigmanomics is complementing what we have discussed today.
Shares are trading at all time highs, pushing on the bullish bias highlighted here and just announced a new revenue driver that can not be ignored.
As the stars seem to align on Amazon, a large, blue-chip stock, it is fair to say the company remains a diversified juggernaut.
Chad Shoop
Financial analyst and Chartered Market Technician specializing in equity analysis and financial writing. Over 10 years of experience as a financial analyst and consultant with expertise in financial modeling, cash flow forecasting, and market analysis. Published across multiple financial platforms.
