Is Amazon A Call Or Put Option Going Into The Holiday Shopping Season?

amazon call or put

As we approach the end of 2015, traders and investors alike are looking to make smart financial decisions ahead of the holiday shopping season. The possibility of generating quick profits off top performing stocks is an enticement that many find hard to resist. One such stock that has garnered tremendous appeal of late is Amazon.com. It is the top performing tech stock of 2015 and it is the go-to investment of 9 of the top hedge funds, including Lone Pine Capital and Tiger Global. The stock is currently trading at $671.20, with a market cap of $313.34 billion and a price-earnings ratio of 941.48.The current earnings per share is -0.52. If we look at the 52-week trading range of the stock, it has a low of $285.25 and a high of $682.77. Clearly, Amazon is at the top of its game in terms of performance and profitability. The one-year price chart of the stock looks more like the launch of a NASA spacecraft than anything we routinely see on the NASDAQ. The upward trajectory of the stock is nothing short of phenomenal.

Amazon Year to Date

Amazon Stock

In fact, for the year to date the stock has grown 116.26% – shattering expectations on most every level. If we delve into the opinions of analysts, Amazon.com remains a strong buy. On a scale of 1.0 to 5.0, the stock has a mean recommendation of 1.8. The mean target price is $726.82 and the high target price is $800 per share. On the low end, all the polled brokers forecast a price of $490. For 2015, the vast majority of research firms initiated upgrade action to a buy, outperform, overweight, market outperform or strong buy. These include Raymond James, Stifel, B. Riley & Company, JP Morgan, Monness Crespi & Hardt. While the current stock price of Amazon is trading near its one-year high, there is general consensus that the stock is either a hold as an investment or a buy. There are plenty of core strengths with Amazon, including its incredible net income growth and revenue growth. The company has a solid financial position and it has been able to successfully manage its debt levels by most standards. The only downside of the stock is its ROE.

The Performance of Amazon.com

performance of Amazon

Analysts are bullish on the stock, and this is easily seen by the consensus earnings per share forecast from December 2015 through December 2018. The number of upwards revisions exceeds the number of downward revisions, another bullish sign for the stock. In terms of general investor sentiment towards Amazon, the trend is clear: call options into the foreseeable future. Another factor that I’ve always taken into consideration with stocks is the quarterly earnings surprise amount. And with Amazon we have seen positive surprises throughout 2015. Given the high quarterly earnings surprises over the past year, it makes sense to go long on Amazon for Q4 2015. Take a look at the following chart below which validates this point.

quarterly Amazon

Amazon and Google Want to Cash in On Black Friday & Cyber Monday

We can expect a bumper season of retail sales in the US, with Black Friday kicking off proceedings right through until New Year 2016. With Black Friday coming up, major tech giants like Google and Amazon are attempting to lure customers away from bricks and mortar retail outlets direct to the online shopping sites. While many folks will be making their way to Walmart and Best Buy, both Google and Amazon are using their tremendous clout in mobile marketing to get shoppers to make mobile purchases. But it’s not Black Friday that is going to see the most shopping in the upcoming week – it’s Cyber Monday. Analysts are expecting online shopping revenues to hit $2.9 billion for Cyber Monday and there is an expected increase of $95 billion over the 2014 figures. Amazon already announced its Cyber Monday deals which will power the retail sales boom through December 5, 2015. Among others, this is what Amazon will be offering its customers:

  • Kindle tablets at $35
  • Amazon Fire TV at $25
  • Kindle e-Readers at $50
  • Kindle Paperwhite $99.99
  • Amazon Echo starting at $149
  • Fire 7-inch tablet starting at $34.99
  • Fire Kids Edition Starting at $84.99

These are the top electronics items that Amazon will be looking to sell in order to boost its revenues over the Thanksgiving weekend. Steep discounts are being offered on top electronic brands, such as Philips, Motorola, Sony and others. And if you’re wondering just how big Amazon really is, consider the fact that it is now bigger than Walmart!

Disclosure: None.

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