Why Amazon stock popped Tuesday

The e-commerce giant was dubbed a top internet pick by one analyst.

| More on:
a man wearing spectacles has a satisfied look on his face as he appears within a graphic image of graphs, computer code and technology related symbols while he concentrates on a computer screen

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

What happened

Shares of Amazon (NASDAQ: AMZN) climbed higher on Tuesday morning, as much as 6.1%. As of market close in the US, the stock was up 4.5%.

The broader markets rallied Tuesday, which no doubt added fuel to its rise, but another catalyst that helped send the e-commerce giant higher was some bullish commentary by an analyst.

So what

Despite the challenges wrought by current macroeconomic conditions, JPMorgan analyst Doug Anmuth noted "increasing interest in select names" across the internet group, as the recent market plunge has resulted in a number of compelling stock buys. One such opportunity is Amazon which remains his "best idea" in the sector. 

Even with the macro backdrop, unfavorable exchange rates, and the overall underperformance of internet-related stocks, the analyst expects Amazon to deliver acceleration of its year-over-year revenue growth, margin expansion, and slower capital spending. These will combine to drive "significant" free cash flow growth into next year.

In an unrelated note, Bank of America analyst Justin Post lowered his price targets on both Meta Platforms and Alphabet, citing increasing pressure from Amazon, as the company becomes a growing force in digital advertising. 

Now what

Both analysts make good points. Investors had largely written off any future growth by Amazon, following the company's significant e-commerce gains during the pandemic. However, Amazon CFO Brian Olsavsky said during the second-quarter earnings call that the company had lapped this high-growth period, which should lead to easier comps and higher year-over-year growth rates going forward. 

Additionally, Amazon is quickly becoming a powerhouse in digital advertising, as its ad revenue grew roughly 21% year over year during the trailing-12-month period, accelerating even as Alphabet's ad growth slowed and Meta's declined. 

Finally, Amazon is selling for a song, at roughly two times next year's sales, near the company's cheapest valuation in more than seven years.

Given Amazon's dominant position in e-commerce and cloud computing, growing prominence in digital advertising, and bargain-basement price tag, Amazon stock is a clear buy.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Bank of America is an advertising partner of The Ascent, a Motley Fool company. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Danny Vena has positions in Alphabet (A shares), Amazon, and Meta Platforms, Inc. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet (A shares), Alphabet (C shares), Amazon, JPMorgan Chase, and Meta Platforms, Inc. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), Amazon, and Meta Platforms, Inc. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on International Stock News

Woman and man calculating a dividend yield.
International Stock News

Prediction: This could be Meta's next big move (and it may happen on July 30)

My prediction is this could be the tech giant's next major move.

Read more »

A tech worker wearing a mask holds a computer chip.
International Stock News

Nvidia chips are flowing to China again — what that means for AI adoption trends

The U.S. government just changed its rules to allow Nvidia to ship its H2O chips to China.

Read more »

Green apple with US hundred dollar bill printed on it.
International Stock News

Should you buy or sell Apple stock before July 31? The answer may surprise you

The technology giant now has a market cap of $3.1 trillion.

Read more »

Woman and man calculating a dividend yield.
International Stock News

Is Nvidia stock a buy now?

Here's a look at whether it's too late to buy the first $4 trillion company.

Read more »

Man holding fifty Australian Dollar banknote in his hands, symbolising dividends, symbolising dividends.
International Stock News

This trillion-dollar artificial intelligence (AI) stock could double your money in 5 years

The tech leader is making moves, and if enough things go right, these initiatives could lead to superior returns in…

Read more »

A young woman sits with her hand to her chin staring off to the side thinking about her investments.
International Stock News

Should you buy Nvidia before Aug. 27?

Nvidia reached a record high recently, and its market value soared to $4 trillion.

Read more »

A woman in jeans and a casual jumper leans on her car and looks seriously at her mobile phone while her vehicle is charged at an electic vehicle recharging station.
International Stock News

Should You Sell These 2 Popular "Magnificent Seven" Stocks Before They Report Earnings?

Investors are on high alert as these stocks prepare to report second-quarter earnings.

Read more »

A smiling woman holds a Facebook like sign above her head.
International Stock News

Prediction: This Artificial Intelligence (AI) Stock Could Hit a $2 Trillion Valuation by July 31

Meta Platforms' recent rally has brought its market cap close to the $2 trillion mark.

Read more »