To The Moon

$Amazon.com(AMZN)$

For years Amazon seemed invincible, an e-commerce giant that made other companies shiver when it muscled into their markets. It helped Amazon stock soar into four-digit territory. And Amazon earnings reports often delighted investors.

But the company proved vulnerable after it uncharacteristically fell far short of Wall Street's forecast when it reported an unexpected first-quarter loss. Amazon stock plunged 14% in reaction, its largest one-day drop since July 2006.

Investors wondered whether the disastrous earnings report was an isolated fluke or a sign of things to come. Some on Wall Street contended the e-commerce titan just needs a few tweaks. But others say it's time for hard-charging Amazon to pause and rethink its strategy.

You could say it has. For example, on Sept. 15, Amazon debuted its first showing of "Thursday Night Football." The game featuring the Los Angeles Chargers vs. Kansas City Chiefs, was the National Football League's first regular-season game available exclusively via streaming. In this case, it was streamed over Amazon Prime Video. Amazon will pay roughly $1 billion per year to carry and produce the games.

Amazon, among other media giants, is betting that all premium video content will someday be streamed. Amazon's deal with NFL football is a stake in the ground, as live sports are one of the last attractions holding the cable-TV bundle together.

Another business with huge potential that Amazon has moved into is health care. On July 29 Amazon announced it will acquire One Medical for about $3.9 billion, including debt. One Medical is a technology-centric primary health care business.

Amazon's acquisition of One Medical is its largest push yet into the health care business, which began with its acquisition of PillPack more than four years ago for a reported $1 billion. That gave Amazon the ability to ship prescription drugs around the country. Amazon will face stiff competition in this market as Walmart (WMT), CVS Health (CVS), and other large corporations are placing big bets on expanding revenue through health care services.

Amazon, in addition to its core e-commerce market, is also a dominant player in the cloud services business.

During the Covid 19 pandemic, things rolled for Amazon stock. As Americans hibernated, the company provided critical services with its vaunted home delivery system. Revenue surged as Amazon could do things nobody else could. But the pandemic's after-effects helped move Amazon into an uncomfortable position.

Globally, labor shortages disrupted the flow of goods through supply chains. Trucking capacity became scarcer and more expensive. The company was also hurt by several other headwinds. This included higher costs driven by labor supply shortages and inflationary pressures.

"Despite these short-term challenges, we continue to feel optimistic and excited about the business as we emerge from the pandemic," Amazon Chief Executive Andrew Jassy said in written remarks with the company's second-quarter earnings release.

Amazon Stock: Benefits From Digital Transition

The Amazon bulls think think the company is uniquely positioned as one of the biggest beneficiaries of the accelerated digital transformation.

Amazon stock jumped 10.4% after it reported second-quarter earnings on July 28 that, while missing earnings estimates, beat on revenue.

Revenue jumped 7% to $121.2 billion, beating estimates of $119 billion. It lost 20 cents a share vs. estimates of a 12-cent profit. However, its Amazon Web Services unit topped expectations, as did Amazon's third-quarter outlook.

"Despite continued inflationary pressures in fuel, energy, and transportation costs, we're making progress on the more controllable costs we referenced last quarter, particularly improving the productivity of our fulfillment network," Jassy said in the earnings release.

Amazon stock is not a buy at this time.

A concern for now is Amazon is trading below its 200-day and 50-day moving averages. It represents the average price over the past 200 days. The moving average can give traders a sense regarding whether the trend is up or down, while also identifying potential support or resistance areas. It also continues to trade well below previous highs.

@TigerStars

DYODD