Why Amazon’s Stock Is Poised to Rise 14%

(Note: The author of this fundamental analysis is a financial writer and portfolio manager.)

Amazon.com Inc.'s (AMZN) stock has risen by more than 38% so far in 2018, and may be heading even higher. An analysis of Amazon's stock chart suggests shares may be set to rise by 14%, taking the stock to roughly $1,850 over the next few months. Shares have recently stalled out, trading sideways since the e-commerce giant reported better than expected first-quarter results at the end of April. 

Amazon was able to easily beat forecasts when it reported earnings of $3.27 per share, more than double the forecast calling for $1.22. The top line was better than expected as well, with revenue beating estimates by 2.2% at $51.04 billion. 

AMZN data by YCharts

Bullish Formation

Amazon is currently rising above a technical resistance level at $1619, with shares currently trading around $1622, suggesting the stock may be ready to surge even higher. The technical chart has a bullish continuation pattern called a flag or pennant formation. The pattern is represented by the sharp move higher in the stock price from $1,360 to $1,618. The sideways consolidation following results at the end of April represents the flag. Based on that pattern and how it projects, it would suggest shares rise by about 16% to $1,850. (For more, see also: Amazon to Be #1 in Apparel in 2018: Morgan Stanley.)

More Bullish Signals

Additionally, the relative strength index (RSI) has broken out of its downtrend as well, which suggests that bullish momentum is heading back into the stock. Volume levels have also started to increase in recent days, as the stock price has started rising—another bullish indication. 

Analysts Grow More Optimistic

Analysts are also growing more bullish on Amazon and see the stock rising by about 16% to an average analyst price target of $1,880. Analysts have upped their price target on the stock by more than 9% since April 20 from $1,713. Of the 49 analysts that cover shares, 96% rate shares a "buy" or "outperform" rating. (For more, see also: Amazon's Ad Push Shouldn't Pressure Google: Mizuho.)

AMZN Price Target data by YCharts

Estimates for the company have been climbing too because of the big beat in the first quarter. Since the end of April, earnings estimates for 2018 have soared by an astonishing 49% to $12.38 per share from just $8.34 per share. Revenue estimates have only risen modestly, or 1.6% to $237.35 billion. 

Amazon has already had a fantastic year in 2018, and it looks like it may be about to get much better.

Michael Kramer is the Founder of Mott Capital Management LLC, a registered investment adviser, and the manager of the company's actively managed, long-only Thematic Growth Portfolio. Kramer typically buys and holds stocks for a duration of three to five years. Click here for Kramer's bio and his portfolio's holdings. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future performance.