Amazon.com, Inc. (NASDAQ:AMZN) Stock Looks Set to Reclaim December Highs

Amazon.com Inc. amzn

Amazon.com, Inc. posted blowout quarterly results late Thursday encouraging traders to jump in en masse. A look at the underlying technicals suggest the stock is set to reclaim the highs of December.

Shares were up 13 percent to $680 in post market trading, after ending the regular session at $602 a share.


Amazon.com Stock – Can it Repeat Last Year’s Performance?

Amazon was among S&P 500’s best performing names of 2015. However, a change in investor sentiment around the turn of the year saw shares tumble over 30 percent to $480. The stock bottomed in February along with the rest of the market, and has since then, mounted an impressive recovery.

Price action over the past one month showed that the area surrounding $640 was proving to be a strong resistance zone. But if yesterday’s after hours activity is any indication, bears are unlikely to hold on to that level, and Amazon looks “primed” for a bounce back to its past peak of around $700.

This boost in both technical and fundamental outlook is primarily on account of Amazon posting its fourth straight quarter of profit, which helped ease Wall Street concerns of a return to loss-making days.

“This quarter they exceeded their operating income … that should relieve some of the concerns…(of) higher fulfillment cost and lower gross margins,” Aaron Kessler, senior research analyst at Raymond James, said on CNBC.

Amazon.com is on Top of the “Cloud”

The undisputed star of the first quarter show was Amazon Web Services, which generated almost 43 percent of the company’s total operating income. Quarterly revenue from Amazon Web Services jumped 64 percent to $2.57 billion from $1.57 billion a year earlier. That topped the consensus estimate of $2.54 billion

“AWS is having its iPhone moment,” according to BGC Partners analyst, Colin Gillis. “Adoption is spreading…margin is expanding.”

No wonder, CEO Jeff Bezos projects AWS sales to reach $10 billion this year. However, Chief Financial Officer Brian Olsavsky was more measured in his enthusiasm, cautioning investors against expecting similar results from AWS in the coming quarters.

“It is very early to start drawing too many conclusions on the long term margins in this business,” he said during the analysts’ conference call. “They will be bumpy over time.”

Bloomberg tech columnist Shira Ovide agrees with that assessment. “For AWS to be the successful grown up that CEO Jeff Bezos wants it to be, it needs now to go after a much bigger slice of the roughly $2 trillion that companies spend each year on computing,” she wrote yesterday.

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