Amazon Stock Forecast 2023: Things Looking Worrisome for the Tech Giant

Amazon Stock Forecast 2023: Things Looking Worrisome for the Tech Giant

Amazon Stock Forecast 2023: For the next 24 hours, the Momentum of Amazon stock price is Bearish and we predict the price of Amazon stock to fall further.


Latest Amazon Stock Price

Amazon Stock Performance

  • Last 5 Days: (-12.1%)
  • Last 1 month: (-24.8%)
  • YTD: (-21.9%)
  • Last 1 year: (48.3%)

2022 was a testing year for all tech companies and Amazon Inc is no exception. Amazon apart from delivering millions of packages to our homes in all these years has delivered astonishing returns over the past decade. In the last ten years, the stock has moved up 700%.

Amazon’s stock price tumbled 48% since the start of 2022. In this article, we will discuss the journey of Amazon stock in 2022 and what can change going into 2023. Importantly, should Amazon be on the buy list for 2023?

  • Amazon has dropped below a $1 Trillion market cap. The company’s earnings are at yearly lows.
  • Sell-off is being driven by a bearish Q4 forecast. The Amazon Web Services division also disappointed with sales off target and not meeting the estimates last quarter.
  • The company is trying to reduce its costs to counter the economic conditions. Among the ‘Big Five’, Amazon is the second-worst performing company as people are returning to physical stores after the lockdown.
  • Amazon.com’s Amazon Web Services is launching AWS Europe Zurich Region. Amazon is planning to invest $5.6 billion in this region through 2036.

Amazon Stock Forecast 2023: Technical Analysis

Amazon stock price once again closed on a negative note. The price level at $91.71 served as support for Amazon’s stock price, Amazon price has not fallen below this level in the last 7 days. I

The chart below shows the price volatility of Amazon in the last few days. Amazon Stock Price after testing the double lows on the lower Bollinger Band reversed and rose closer to the upper Bollinger band. Amazon price started to fall and is expected to full further.

Traders will have to wait for the price of Amazon stock to rebound.

The current momentum is Bearish and the recommendation is SELL.

image 62

Moving Average and RSI

On the 4-hours chart, the 30-day moving average and the price line have converged. However, the price is moving in a descending path throwing a bearish trend.

Amazon is trading below the 200-day moving average. There was a surge in the price of Amazon stock when the 30-day MA line crossed the 200-day MA line (Green) from above. On September 30th, the 200-day MA crossed the 30-day MA from above and since then the trend reversed and Amazon stock price has been trading negatively.

The RSI just before entering the over-purchased zone reversed.

The current Momentum is Bearish and we predict the price of Amazon stock to fall further.

image 63

Amazon Stock Forecast 2023: Journey of 2022

Amazon faced major headwinds in 2022 in the form of high inflation, the probability of recession, and issues in the global supply chain. High inflation was the double whammy for the company as they had to pay higher costs for logistics and at the same time, retail people did not spend as much as was expected on shopping due to higher costs of basic items like food and gas. 

But the actual problem started back in 2020. At the time of Covid 19, due to excessive demand, it ramped up its warehouse numbers and the number of headcounts in retail sales. But as demand plunged in 2022, these increased costs came back to hunt the management. 

Another nail in the coffin for Amazon in 2022 is its recent third-quarter results. On October 27th, Amazon declared the results and they were not up to expectations. While total sales increased 15% YoY to $127.1 billion, the operating income fell by 49% to $2.5 billion from $4.9 billion a year ago in the same quarter. Management expects sales to be $140 to $148 billion and operating income between $0 to $4 billion, both are well below expectations. 

All this led to a 48% decline in the stock price to date and analysts expect some more weakness till the end of 2022 as one more Fed meeting is still pending and it is believed that trend of rising interest rates will continue. But what are the factors that can prove to be the turnaround for the e-commerce giant in 2023?

Amazon Stock Forecast 2023: Factors to look out for in 2023

  • AWS and ad Revenue are the bright spots – In the recent quarterly dull results, it is the AWS sector and ad revenue that stands out. One of the key growth drivers of AWS- the cloud computing segment sales jumped 27% to $20.53 billion and the segment’s operating income increased 11% to $5.4 billion. Although AWS is used to growing at more than 30% in each quarter, 27% growth is also worth mentioning.

Its other sector is digital advertising which is the third largest ad platform only behind Google and Facebook. In the recent results, advertising revenue jumped 25% to $9.54 billion, approaching the $40 billion annual sales target. Although Amazon does not report the operating income for advertising, it is close to 30% as observed from peers like Google and Facebook. 

So, while e-commerce sales can be a bit sloppy in 2023, it will be AWS and ad revenue that can give Amazon an extra edge. These sectors should be looked out for separately in 2023.

  • The meaningful acquisitions – Amazon has been on an acquisition spree since 1999. Today, one of the most loved digital gadgets Alexa was bought by Amazon as Alexa’s internet business in 1999 for a too small amount to be disclosed. Alexa was nothing back then, but now it is an important artificial intelligence system connecting Amazon’s smart home and personal assistant devices. 

Over the years, Amazon has made many more such acquisitions. But for 2023, there are two which are worth mentioning. The first is a $3.9 billion buyout of One Medical, which can give Amazon wings to enter the healthcare sector. It is a primary care service with a presence in over 200 locations and 24/7 access to virtual care. 

Second, was the acquisition of Whole Foods in 2018. The $13.7 billion buyout added 472 physical stores to Amazon’s all-digital sales model.  Although it accounted for 3.6% of total Amazon sales last year, the chain is evolving quickly as we discuss Amazon shares. 

For 2023, to be the year for Amazon Inc, one of its acquisitions, either One Medical, Whole Foods, or Roomba maker iRobot has to click and significantly to its revenue and profitability.

  • Everything Boils Down to ValuationValuations are very important in this high-inflation market, where investors are dumping “highly valued growth stocks”. For Amazon, the current dip in the stock price has cooled off its valuations to a large extent. The TTM price-to-sales ratio is only 1.84 which has come down from highs of 4.30 and 3.65 in 2020 and 2021 respectively. This is one of the lowest in past six years. 

Moreover, AWS and ad revenue are key strengths of Amazon which will not allow the sales to go down in 2023. The price-to-earnings ratio of 82 looks a bit high on the surface, but it had the same EPS in 2020 and 2021. Also, it is due to dropping earnings per share from 3.30 in 2021 to 1.11 in 2022. It is likely to move upside down in 2023, and hence valuations will be further down.

Amazon Stock Forecast 2023: Valuations

While Amazon’s predicted earnings for FY 2023 are 1.82, the EPS trend is on the great upside, thus estimates may continue to rise. Shares of AMZN are currently trading at a P/E ratio of 89x based on the forecast EPS of 1.82. This is pointing out the fact that Amazon is only going to increase heavily in its earnings in the coming time. This translates to a PE of 51.2. Depending on how harsh the recession will be, Amazon will find a way to keep its earnings on track.

The earnings forecast and future cash flows are very highly valued. From the PE valuation point, it looks overvalued but it has always been the case with Amazon. The industry average of PE is 150 with the retail sector average of 32. So, all in all, Amazon is fairly valued now with a good opportunity to buy if one is to look at their predicted earnings for the coming years.

Amazon Stock Forecast 2023: Ratios

  •  PE Ratio – 89.18

This ratio compares a company’s share price to its earnings per share. The average PE of Amazon from 2015 comes to around 156 which means that Amazon is undervalued in its own rights at the moment. The industry average PE is also around 150. 

  • Price to cashflow – 25.30

It compares a company’s market value to its operating cash flow and the lower it is, the more undervalued a stock is. Looking at the historical ratios, we can say that Amazon is fairly able to maintain an average of 25 since 2015 which means that it is not that undervalued at the moment. Last year it was 37, so one can say that if compared to that, it is undervalued right now.

  • Price to Book Value – 7.20

It is used to compare a firm’s market capitalisation to its book value. P/B ratios under 1 are the ones that attract most of the value investors. If compared to how it was for Amazon over the years, it has halved in value and this is a good sign for investors as the books and assets of the company is getting corrected.

  • EV/EBITDA – 20.67

This measure is used to determine the value of a company. The best use of this ratio happens when it is compared with the industry average. It values the company, debt included, to the company’s cash earnings less non-cash expenses. Amazon.com’s ev / ebitda for fiscal years ending December 2017 to 2021 averaged 33.8x.  Amazon.com’s operated at median ev / ebitda of 29.2x from fiscal years ending December 2017 to 2021.

  • Return on Capital Employed – 4.53%

This percentage is used to check the company’s capital efficiency and profitability. It can simply be interpreted as a higher value means higher the company’s profitability. In this case, Amazon is at a low of what it was in 2017. It had maintained an average of 9.2%since 2015 and that’s a bit concerning to see the return fall below 5%. Looking at these numbers, Amazon looks very much undervalued right now and can be a good buy.

Amazon Stock Forecast Today

Overall OutlookNeutral
1. Market's WisdomPartially Negative
1a. Market DataNeutral
1b. Technical RecommendationSell
2. Crowd's WisdomPartially Positive
2a. Social Media BuzzHigher
2b. Social Media SentimentNeutral

Amazon Stock Forecast: Will Amazon Stock Recover?

There are two aspects to this whole dilemma of whether the tech giant Amazon will be able to go back to the highs that it once had. One is to look at this technically and the other is to analyze it fundamentally by looking at how the company did in the Q3 earnings. 

Coming onto the fundamentals, we can say that after the business reported mixed financial results in Q3, shares of Amazon.com, Inc. the largest U.S. e-retailer, lost a fifth of their value in extended trading. As a result of lower-than-expected total income and revenue for Amazon Web Services (AWS), Amazon forecasted weak holiday sales for the fourth quarter as consumers cut down on their spending in response to the uncertain economic climate.

Despite the fact that the market seemed to be focusing on concerns about growth, there was at least one positive aspect of the earnings report: Amazon posted third-quarter profits that were higher than expected because of a $1.1 billion valuation gain in its investment in Rivian Automotive Inc. (RIVN). Against a $0.22 average estimate, Amazon reported earnings per share (EPS) of $0.28. This comes after losing two straight quarters. However, despite revenue increasing by 15% to $127.1 billion, expectations were not met because of weakening overseas sales and negative foreign exchange rates, which largely offset growth in the North American e-commerce sector.


Read our analysis on Apple : https://crowdwisdom.live/us-stocks/apple-stock-forecast-2023/


Amazon Stock Forecast 2023: Conclusion 

As we know that the global environment of high inflation and economic woes is temporary. Therefore, to conclude, Amazon has weathered the difficulties maturely and is poised to grow better in 2023. For example, the company is working on a stronger cost structure which is a big plus for the long term. Also, Amazon is attracting more and more customers towards Prime subscriptions through NFL Thursday Night Football premier and many other such shows. 

Most importantly, Amazon Inc has diversity in its business. Apart from being its moat in E-commerce, AWS is its growth engine and ad revenue has just started to gain the spotlight. Hence, it is important to believe in the business model of Amazon. Additionally, the recent dip presents a good opportunity for investors to add it to their portfolio for 2023. 

-Vineet Agarwal

Note: Crowdwisdom360 collates Predictions and data from all over the net and has no in-house view on the likely trends in the Stocks or Crypto Coins. Please consult a registered investment advisor to guide you on your financial decisions.

Vineet

Vineet

Vineet Agarwal is a trained technical analyst and avid stock trader. A graduate from a Top Technology Institute, Vineet carries out extensive technical and secondary research for this authored stock forecasts.

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