Amazon (AMZN) has been a powerhouse. For years, it has made investors rich as they continue to build out their core retail competence into adjacent spaces. From its origins as an online bookseller, Amazon has grown into a retail powerhouse, a cloud hosting service, and even a device manufacturer (Kindle, Fire and Echo). All the while, they gather massive amounts of data about their customers, and Amazon is now a marketing powerhouse.
So with all of that positive dominance in their markets, why are people beginning to doubt Amazon? Marc Chaikin in his Sunday letter to Chaikin Analytics subscribers made the case that Amazon valuation had deteriorated, and called it the “Bear of the Week”:
“I have seen many storied growth stocks come and go in my 50 years on Wall Street and understand very well the power of price momentum and a strong institutional following. Thus, none of the above would cause me to turn bearish on a stock like Amazon if the technical picture had not deteriorated.
AMZN spiked up to $1083.31 on July 27, on ultra-high volume, in response to its 2nd quarter earnings report. It then had a sharp gap down the next day and has continued lower ever since. This bearish pattern suggests that the upswing for Amazon that began at $474 in February of 2016 may have run its course. Sell AMZN on any rallies towards the $990 -1,000 area.”
Last night, Jim Cramer echoed Marc’s concerns. Like Marc, he cited the new competition from the Google / Walmart link up. Additionally, he cited the wildly successful Amazon Cloud Business (AWS) as facing increased competition from Google, Microsoft Azure and IBM.
Both analysts felt that Amazon’s move into brick and mortar business with their acquisition of Whole Foods would lower margins and profits in the short term. Cramer, in particular, felt that analysts had not priced this into their Amazon models. He predicted that there will be more negative pressure on Amazon when they do.
From a broader market perspective, Amazon has been an integral part of the FANG (Facebook, Amazon, Netflix, and Google) stocks that have been responsible for much of the market’s big move this year. If FANG starts to crumble, will that impact some of the support for current market prices? This will bear watching as investors look more closely at Amazon. For now, two investment legends are focusing their warnings on Amazon.