To The Moon

Looking Beyond the Recent Pullback

Amazon's recent earnings report solidified my long-term bullish stance on the company. While the broader market experienced a pullback in mid-April, Amazon not only beat analyst expectations on both revenue and profit, but also showcased impressive growth across key segments like AWS and advertising. This resilience in the face of rising interest rates makes me even more confident in Amazon's future potential.

Profitability Powerhouse

Amazon not only surpassed expectations on both revenue and earnings, but its operating income soared over 200% year-over-year. This tells a more profound story than just top-line growth. It signifies the effectiveness of CEO Andy Jassy's focus on streamlining operations and squeezing out inefficiencies. This newfound cost discipline, coupled with the continued strength of their cash cow, AWS, which accounted for 62% of total operating profit, paints a very optimistic picture for Amazon's bottom line.

CEO Andy Jassy

One of the biggest strengths Amazon possesses is the diversification of its revenue streams. We all know them for their retail dominance, but that's just one piece of the puzzle. Their cloud computing business, AWS, continues to be a major growth driver, experiencing a healthy 17% increase in sales this quarter. But the breakout star this time around was the advertising sector. The 24% surge in ad sales, fueled by the launch of ads in Prime Video, highlights the vast potential of this segment. This diversification acts as a hedge against fluctuations in any single market, making Amazon a more resilient company overall.

Perhaps the most exciting aspect of Amazon's performance is its ability to deliver strong growth despite the current economic headwinds, particularly rising interest rates. This ability to thrive in a challenging environment speaks volumes about the strength of their business model. It fosters confidence that once these headwinds subside, and interest rates inevitably come down, Amazon is poised for a significant growth acceleration.

Technical Take

AMZN Daily Chart

As a technical investor, I'd be remiss not to acknowledge the recent pullback in Amazon's stock price. The fall from the ascending channel in mid-April mirrors the broader market correction. However, a closer look reveals reasons for optimism.

• Key Breakout Level: A decisive break above $183 and subsequent hold is crucial for a bullish reversal. This technical level signifies a potential trend change and a continuation of the uptrend.

• Support Zone and Potential Buying Opportunity: The $166 level acts as critical support. A break below this point could signal a bearish continuation of the pullback. This zone, however, also presents an attractive buying opportunity, especially for investors with a long-term horizon.

Personally, I would start adding to my positions if the price goes under 171.

The short-term market gyrations might create noise, but my focus is on the long game. When I look at Amazon, I see a company with a massive and growing scale, a diversified revenue base that's firing on all cylinders, and a relentless focus on improving profitability. These are the hallmarks of a long-term winner. Their constant innovation and ability to adapt to changing market dynamics further solidify their position as a leader in the e-commerce and cloud computing sectors. The recent pullback presents a compelling entry point for investors who share my long-term bullish thesis on Amazon.

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Disclaimer:This post reflects my personal opinions and should not be considered as financial advice. Always conduct thorough research before making any investment decisions.