Amazon (AMZN) could be an attractive opportunity for bargain hunting investors.
Shares of the Seattle superpower were sliding in morning trading despite strong quarterly earnings as the projection of a slowdown in sales and pressures on margins influence the market.
Yet, analysts and investors are eyeing an attractive entry point for one of the most consistent stocks in history.
"Historically, investors were well served to increase their purchase of shares when short-term investment cycles led to pullbacks in its share price," D.A. Davidson analyst Tom Forte noted.
Action Alerts PLUS portfolio manager Jim Cramer added to the outlook, noting that despite the conservative guidance from the company, which was a strategy pursued by the company in the third quarter as well, is clouding a view of a company hitting all of the right notes.
"This is a company where Amazon Web Services is firing on all cylinders, Amazon advertising is great, Amazon entertainment is going to be great," he said. "Don't give up on it, that's all I have to say."
For reference, if investors had bought into the stock after its third quarter earnings slide, they would be enjoying about a 12% gain even amid Friday's selloff.
The core strength in cloud and e-commerce are key as the company ramps up investment, according to bullish analysts.
"Ongoing strength from AWS (+46% in 4Q) and its recurring revenue enable aggressive investments back into the core business while still expanding the margin profile (we think margins can double from mid single digits to low double digits over time)," Jefferies analyst Brent Thill pointed out. "[Amazon] remains a top large-cap pick."
The company's report of record breaking holiday sales numbers adds to Thill's positive outlook as well, with Amazon Alexa and Echo Dots shattering sales expectations.
"Alexa was very busy during her holiday season. Echo Dot was the best-selling item across all products on Amazon globally, and customers purchased millions more devices from the Echo family compared to last year," CEO Jeff Bezos said in a statement.
Thill explained that while weakness may be exhibited in the short term, the long term thesis for the stock remains seriously strong. As a result, Thill set a lofty $2,300 price target and reiterated his "Buy" rating for the stock.
"Amazon is a leader in two large and rapidly growing markets, eCommerce and cloud services. Revenue momentum for the business continues to impress, while growth trends appear positive / stable with low-20% to low-30% growth in the last four reported quarters," Stifel analyst Scott Devitt said, adding to the bullishness.
Advertising revenue charted a 97% growth rate year over year, denoting the potential for the nascent segment. While this was a deceleration from the prior year growth rate, this is somewhat expected as the sustenance of such a growth rate calls for billions more in advertiser buy-ins.
"We don't think there is an issue with Advertising as the business is believed to be taking share from the large players in the industry, while also expanding features and installing improvements to make the service friendlier to other companies," the Action Alerts PLUS team, which counts Amazon as its largest holding, said.
The company is investing quite a bit in ancillary opportunities like video, devices, and Prime services, that add to the bullish views stacking up for the core business.
To be sure, this curbs the near term prospects for margin expansion as spending ramps amid cyclical pressures. Conversely, the longer term look at Amazon's spending helps justify the move.
"We support where Amazon's investment dollars are focused as we believe this better positions the company for continued market share gains and opportunity for greater margin expansion once the company emerges from the current investment cycle," Stifel's Devitt said in summation of the activity.
He set a $2,300 price target, suggesting significant upside still available for investors ready to ride out a lumpy quarter or two.
In the end, it's hard to bet against Jeff Bezos, who, it could be argued is the Bill Belichick of CEOs. If you're wagering, it might be a good move to take the money meant for your bookie and place some bets Amazon.