Amazon’s $593 Billion Rally Faces Endurance Test

Analysts are almost universally optimistic about Amazon.com Inc., one of the biggest winners this earnings season. But further near-term gains may be harder to come by.

(Bloomberg) — Analysts are almost universally optimistic about Amazon.com Inc., one of the biggest winners this earnings season. But further near-term gains may be harder to come by.

Fueled by resurgent profit and revenue growth, shares of the e-commerce and cloud-computing company have risen 5% this month while Apple Inc., Microsoft Corp., Alphabet Inc. and Nvidia Corp. have all fallen. But, after adding nearly $600 billion in market value this year and with earnings out of the way, some say a fresh spark is needed amid signs of a stalling big tech rally.

“You need a real catalyst for Amazon to break out of its range, and that’s going to be difficult to come by since we just got earnings and tech seems to be losing momentum in general,” said Rick Bensignor, president of Bensignor Investment Strategies. “With Amazon trading at the highest it’s been in a year, this is not the time or the place to be adding.”

Shares of Amazon fell 0.2% on Tuesday.

After underperforming other megacaps for most of the past two years, Amazon shares broke out in the second quarter and have continued to rise amid the firm’s cost-cutting efforts and signs that its cloud business is stabilizing. The stock is now up 67% in 2023, nearly twice the gain for Microsoft.

“The market is starting to wake up to how there’s far more robustness here than has been recognized, which will create significant momentum,” said Mike Loukas, chief executive officer of TrueMark Investments.

While it still trades about a quarter below a record high from mid-2021, investors say that breaking above the 52-week high of $144.78 would be a bullish development. The stock has traded at around the $140 level in recent sessions.

Hedge funds were net buyers of Amazon in the second quarter with 172 institutional investors adding to positions, compared with 132 cutting stakes, according to data from 13F filings compiled by Bloomberg. Dan Loeb’s Third Point LLC was among firms that boosted bets on the stock while Stanley Druckenmiller’s Duquesne Family Office reduced its position.

Bulls point to earnings that are expected to grow at a double-digit pace each year over the next several years, while the consensus for Amazon’s 2024 net earnings has risen by more than 20% over the past six months. Revenue is also expected to accelerate, although its growth last year was the slowest in its history as a public company.

The risk is that there may be few incremental buyers at this stage to keep pushing shares higher, Bensignor said. “This may be an occasion where it is safer to wait for a higher price, once a breakout has been confirmed, rather than bet on a breakout occurring in the first place,” he said.

Tech Chart of the Day

Shares of Apple Inc. are set to snap their longest monthly streak of gains in about nine years. The iPhone maker is down 8.9% this month, putting it on track for its first monthly decline in 2023. The weakness comes after the technology giant reported its third straight quarter of declining sales and predicted a similar performance in the current period.