As Chart 1.1 shows, I specially mentioned in Nov 18th posted as "Correction is complete and potential for the rally", as I said, holiday-shortened trading week normally sees lighter trading volume, and because of markets has trended mostly sideways with declining volume at elevated prices, then time correction have been completed, 8&21 Emas has catching up already. Therefore, market were like dry tinder awaiting the slightest spark. Powell speak is that spark to lighten up the whole market.
As showed in Chart 1.2, I recommended
AMZN
, and if you did follow, then "congratulations" , you might bought a bottom of AMZN for next couple months. Holders of Amazon (
AMZN
) have seen plenty of pain over the past year, as the share price has cratered, with it now sitting at almost half of its 52-week high of $180. However, now is the time to remain focused on high quality companies such as this one, which can be had for a bargain. Amazon is an unrivaled leader in the consumer, enterprise and retail space. It is one of a handful of companies that has maintained market dominance for years and continues to grow its market share by leveraging technology, data and customer service.
Moreover, Amazon has an abundance of cash on hand and is projected to continue to generate substantial free cash flow over the next several years. With a huge war chest built up, it can easily invest in new projects or acquisitions that will help increase its market share and profitability. This includes $58.7 billion in cash on hand, sitting against $65.6 billion of long-term debt, helping it to earn an AA credit rating from S&P, just one notch below that of the U.S.Government.
AWS continues to dominate the cloud market, with a 34% market share as of the end of the third quarter, sitting far ahead of rivals Azure (
MSFT
) and Google Cloud (
GOOGL
). Talking about risk, I mean besides inflation, one of the narratives that have dominated financial headlines this year is the strengthened U.S. dollar, which has posed currency conversion headwinds for multinational U.S. companies. This is reflected by international segment sales declining by 5% YoY, but increasing by 12% excluding changes in foreign exchange rates.
AMZN currently trades at a blended price to OCF ratio of just 19.7, sitting well below its normal P/OCF ratio of 26.9. I believe a P/OCF ratio of at least 25x is justified, considering the moat worthy enterprise, recent growth, and analyst estimates for strong growth in the coming years.
The long-term growth thesis remains intact as currency effects should normalize over time and AWS continues to dominate the cloud market. Furthermore, AMZN's moat worthy enterprise, well below historical valuation, and analyst estimates for strong growth in the coming years make it a compelling buy at the current price for potentially rewarding long-term gains.
Please feel free to express your ideas and thoughts in the comment section.