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Amazon is the largest online retail company in the world. It outperforms its competitors such as eBay and Alibaba. It is an American global firm based in Seattle that Jeff Bezos established as a library for books before 1995. The initial business of the company included a listing of books online in the form of a library. Later, Amazon diversified into many other facets of business such as online video streaming, sale of groceries, and other items such as the sale of equipment. The use of the internet has permitted the firm to global leaders in the retail business, reach novel clients, and infiltrate different client markets worldwide. The study will graphically explore the trend of Amazon’s stock prices during the last four months. Also, it will check its prices during the previous three weeks of operations. The paper will discuss the observed trends and relate them to relevant contextual data. It will briefly forecast the alterations in prices for the next month.

The month of November 2020 was a disappointing year for Amazon’s share as the share fell to $1,800 in early November, representing a 3.5% decline in the last two weeks. Also, so, the stock fell by 2.2% on November 11-15. According to Peavyand Rodriguez (2020), the month closed at $3,143 during the latest trading season. However, the share has grown 16% in value with a market capitalization of $862 billion at the end of the week. The company share price surged due to better performance in the overseas segments and an increase in long-term return streams.

The December stock price was $3,256.9 as the company is traded at a 60.3% premium than its past median P/S valuation. In January, the stock of the company January was a high of $3363.9. Amazon shares dropped by 2.2% as it was announced on 2nd February 2021. The company had recorded returns at $386 billion in 2020, which increased by 37%. It had earnings per share of 42.61 from $23.46 recorded the previous year attributed to better performance. The company has declared that Bezos will step down as the company's Chief Executive Officer and his position taken by Andy Jassy (Tou, Watanabe, Moriya, Vurpillat, & Neittaanmäki, 2019. p. 30). However, the news of Bezos stepping down resulted in the fall of stock prices by 2.2%. In contrast, the S&P 500 of the firm increased by 2.5% over the last five days.

The IBD stock checkup instrument highlight that the company has a composite rating of 87. It means that stock outperforms 87 percent of its shares in terms of the most critical fundamental and technological stock-picking criterion. The relative strength rating is a weak 46, and the measures track rating market leadership by highlighting how the stock price moves over the last 52 weeks. It is essential to invest in stocks with a rating of above 80. Currently, Amazon has an accumulation of C- and explores the volume and price alteration of stock in 13 weeks of trading. The C grade shows a neutral performance of the company.

Technical Analysis

The graph shows that the company is consolidating with the increasing trend. The higher buttons in the map indicate surging demand at higher price targets. The company should seek to break above the latest top for the resumption of the fundamental uptrend. The graph shows the value of Amazon Company continues to increase from 2018 to 2020. Also, the projection of 2021 is that the company's share price continues to grow as the year advances. The surge in money flow shows the entry of new cash in the market and that MACD will deteriorate long-term.

Amazon is a high-end e-commerce platform and offers various services such as music subscriptions, Kindle, and the retail market. The company benefits from selling online and digital products by 50%, while commission and shipping fees make 19%. According to Peavy and Rodriguez (2020, p.67), Amazon gets revenue sources from storage, computing, and database services, amounting to 13%. Prime membership fees and subscriptions account for 7% of its revenue, while advertising expenditures and co-branded credit cards account for 5%. Amazon’s diversification ensures that the company has numerous streams of income and remains profitable throughout the years.

Amazon's share might increase due to heightened demand for e-commerce services and products due to the Covid-19 pandemic. Also, the post-pandemic era will increase the demand for e-commerce services and products. Further, there is a lot of diversification in services and products that will increase the company's revenue growth and shares. The company projection is that share Amazon will hit $4,000 per share by the end of 2021. Therefore, it is advisable to purchase the shares of Amazon.

There are several advantages of owning Amazon stock. Bezos, an experienced team leader, runs the company with immense experience in management, making its shares increase, benefiting its investors. The CEO has a long-term focus on the company's betterment by having an obsession with the client and continuous improvement in innovation. The company continues to improve performance and expand its online opportunities, ensuring that it makes more profit than pays dividends to its shareholders. The company made more than $100 billion in the first quarter, surpassing an expectation of $95.8 billion. It means that the dividend of the company will increase as revenue increases.

The investor should also check on Amazon’s diversification program. The company relies on client’s financial health to advance its sales. However, the firm's revenue was not affected during the Covid-19 pandemic due to its diversification program. The market share is projected to surge due to people's preference for shopping online due to the pandemic. The company's operating margin in the last quarter was 28% showing from 26.1% in the previous quarter of 2020 (Wells, Danskin and Ellsworth, 2018, p.720). It shows that the profitability of the firm is increasing as the company diversifies into doing more business.

The disadvantage of purchasing Amazon’s stock is the risk of overvaluation due to Amazon's success in the fourth quarter of last year. The firm’s stock trades for about 100 times earnings, and the revenue increased by 44%. The company may not be able to keep up with the trend. Therefore, shareholders may buy overvalued stock and may not attain increased dividends from this year or keep up with the high prizes.

The investor should not purchase Amazon’s stock now, but it should keep an eye on its price. The relative strength line of the firm’s stock has steadily declined since the company posted its earnings. The close strength line evaluates the cost of the stock compared to the S&P 500. Generally, the line indicating the highest stock prices either conforms or leads a stock price into novel high ground.

Additionally, another reason not to buy Amazon stock is that it trades below its 50-day moving average. An investor can use the line to check whether the company is trading below the line or not to determine its strength or weaknesses. Amazon price stock moves below the line showing a sign of weakness. However, long-term investors need to have a stake in Amazon. The news of Bezos stepping down as CEO can impact the performance of the firm. Nonetheless, the investors should understand that he will come back as Chairman of the board and continue to exert an enormous impact on the company. Also, he has prepared Jassy as his successor, and he is confident that she will perform well and increase its share price.

Various factors can impact Amazon’s stock price, such as global market situation, long-trends, firm’s financial results, news, and analyst forecasts. The universal market condition affects the business of certain firms and largely determines the conduct of investors. For example, a covid-19 state places pressure on the entire share market prediction of the market. Long-term trends such as technological growth in the international economy have a critical impact on the shares' price.

The firm’s financial results can alter the price of its share. Amazon prices can exceed the expectations of investors and experts, causing stock rise or reduction. In case the company supersedes, the return exceeds the earnings and expectation of investors. Also, news and investigative journalism can result in a change in share price forecasts. Therefore, it is essential to be weary of all this factors before buying Amazon’s shares.

The study has explored Amazon, which is the largest online retail firm in the globe. The research has examined the trend of Amazon’s stock prices graphically during the last four months. Also, it will check its prices in the previous three weeks of operations. The company has analyzed the stock price trend in November, December, January, and February. The paper has discussed the observed trends and related them to relevant contextual data. Amazon's share price is expected to increase in the year due to an increase in prices. It has briefly forecast the alterations in fees for the next month and offered its recommendations. Further, it has discussed the advantage and disadvantages of purchasing Amazon shares and recommendations.

References

Tou, Y., Watanabe, C., Moriya, K., Vurpillat, V. and Neittaanmäki, P., 2019. A new concept of R&D in neo open innovation: transformation of R&D triggered by Amazon. International Journal of Managing Information Technology, 11(1).

Peavy, C.B.B.J.W. and Rodriguez, M., 2020. Emerging Stock Markets: Risk, Return, And Performance.

Wells, J.R., Danskin, G. and Ellsworth, G., 2018. Amazon. com, 2018. Harvard Business School Case Study, (716-402).