Amazon - Down to Support!

-AMZN’s stock price has held relatively steady around $3,200 amidst the selloff in growth stocks, but the stock has barely moved over the last 10 months.

-AMZN reported typically strong results in the latest quarter. Revenues grew 44% over the prior year to $108.5 million.

-The rising top-line has led to strong bottom-line results as well, with net income rising 220% to $8.1 billion.

-Amazon Web Services (‘AWS’) remains a crown jewel, as it was able to produce $4.2 billion in operating income in the quarter, representing a staggering 30.8% operating margin.

-AMZN had just over $50 billion in net cash as of the latest quarter.

-For the next quarter, AMZN has guided for 24% to 30% top-line growth as well as $4.5 billion to $8 billion in operating income (as compared to $5.8 billion in the prior year). Wall Street analysts expect AMZN to grow earnings by over 30% on average over the next 6 years.

-AMZN is trading at 67 times trailing earnings. That looks very high, but the discussion above showed that AMZN may be able to substantially boost its bottom line through long-term margin expansion. Assuming 2% margin expansion, AMZN would trade at only 45 times trailing earnings - which seems to be a bargain considering the company just grew its top-line by 44%.
Credits: Julian Lin

Our Opinion:
Although Amazon has a P/E ratio of 62 and it might look scary to some investors, counting the expansions and probable upcoming expansions, it appears to be more reasonable than scary. Matter of the fact is that the P/E ratio is not always correct as it doesn't count in the Cash and Debt of the company. A more accurate form of P/E would be EV/EBITDA which currently stands at only 27.11 which is not as scary as 62.
We see a potential drop to the closest support standing at 3,060-3,070 and then gaining the strength back for a further rise to 4,000's in mid to long-term