Is Amazon.com Stock Underperforming the Nasdaq?

Amazon.com, Inc. (AMZN), headquartered in Seattle, Washington, is the world’s largest online retailer and marketplace. The company engages in the retail sale of consumer products, advertising, and subscription services through online and physical stores. With a market cap of $2.4 trillion, its products include books, music, computers, electronics, and numerous other products. Amazon offers personalized shopping services, web-based credit card payment, and direct shipping to customers. It also operates a cloud platform offering services globally.

Companies worth $200 billion or more are generally described as “mega-cap stocks,” and AMZN definitely fits that description, with its market cap exceeding this threshold, reflecting its substantial size, influence, and dominance in the internet retail industry. Amazon’s dominance in the global market is bolstered by its extensive reach and strategic investments in cutting-edge technology. By leveraging its scale, the company is able to offer competitive pricing and drive innovation, particularly in areas such as AI and cloud computing. Amazon’s steadfast commitment to customer satisfaction further solidifies its position as a market leader.

Despite its notable strength, AMZN has slipped 12.5% from its 52-week high of $258.60, achieved on Nov. 3. Over the past three months, AMZN stock declined 1.1%, underperforming the Nasdaq Composite’s ($NASX) 6.2% gains during the same time frame.

In the longer term, shares of Amazon rose 3.1% on a YTD basis and climbed 14.8% over the past 52 weeks, underperforming NASX’s YTD gains of 18.4% and a 20% surge over the last year.

To confirm the bullish trend, Amazon has been trading above its 200-day moving average since mid-May, with slight fluctuations. However, the stock has been trading below its 50-day moving average recently.

AMZN’s underperformance stems from concerns over AI investment returns and AWS growth, with analysts citing “dilutive returns” from AI spending and limited upside potential. Heavy CapEx on AI and infrastructure has pressured the stock.

On Oct. 30, AMZN reported its Q3 results, and its shares closed up by 9.6% in the following trading session. Its EPS of $1.95 topped Wall Street expectations of $1.58. The company’s revenue was $180.2 billion, surpassing Wall Street’s $177.9 billion forecast. For Q4, AMZN expects revenue in the range of $206 billion to $213 billion.

In the competitive arena of internet retail, eBay Inc. (EBAY) has taken the lead over Amazon, showing resilience with a 30.6% uptick on a YTD basis and a solid 27.9% gain over the past 52 weeks.

Wall Street analysts are bullish on AMZN’s prospects. The stock has a consensus “Strong Buy” rating from the 57 analysts covering it, and the mean price target of $295.85 suggests a notable potential upside of 30.7% from current price levels.

On the date of publication, Neha Panjwani did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com