Amazon.com, Inc. (NASDAQ:AMZN) is ‘Primed’ for a 10% fall from current levels, reckons Rich Ross of Evercore ISI. If that turns out to be true, one of 2015’s hottest stocks will officially be flirting with bear market territory.
Along with Netflix, Amazon was one of the two S&P 500 stocks that doubled in value last year. But Ross says that the once high-flying name is now highly likely to undergo a hard fall.
Amazon shares have tumbled 15% this year. In the process, it has majorly under performed the S&P 500, which is down 8% year to date. Add to that the fact that the stock is now fast approaching a key support zone at its 150-day moving average.
Amazon is on the Brink of a Major Sell-off
Ross notes that Amazon had managed to hold above both the 150-day and 200-day moving averages throughout the past year. But this time, the sentiment on Wall Street is loaded against the stock.
If Wednesday’s pre-market activity is any indication, Amazon.com, Inc. (NASDAQ:AMZN) should test its 150-day moving average at $563 within the next couple of trading sessions. A break below that would see shares plummeting to their 200-day moving average at $520, Ross added.
Considering “ the false breakout to a fresh new high and the volatility in the broader market, another 10% on a break below 150-day is really not unreasonable,” Ross said on CNBC’s “Trading Nation.”
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And the worst case scenario is if the 200-day moving average does not hold. If that happens and $520 breaks, Amazon could go as low as $500, Ross said. However, he goes on to explain that such a deep correction should not be taken as a foregone conclusion.
“The trend is still higher despite this pullback… and we continue to hold the moving average…which is defined support throughout the advance,” he said. “In the absence of a break below that level, we would expect to continue along that trend.”
Credit Suisse Thinks Amazon Growth Story is Not Over
Despite the dismal start to the year, analysts at Credit Suisse think the Amazon.com, Inc. (NASDAQ:AMZN) growth story is still intact. In a research note sent to clients on Tuesday, Credit Suisse reiterated its “Outperform” rating for the stock. Analysts there have a $800 target price. That translates to a roughly 40% upside from the last closing price.
According to data from Thomson Reuters, Amazon’s stock is covered by 41 analysts across Wall Street. 37 have a Buy rating, while 7 of them consider it a Hold. Interestingly, no one has as yet put a Sell stamp on the stock. The 12-month consensus price target is $746.76.