BY MARK SEBASTIAN
August 17, 2024
REPLAY
THL Trade: Buy-to-open VIX September 18, 2024 13 puts for less than .20, sell most up 100%
Amazon Inc. (Ticker: AMZN)
Amazon (Ticker: AMZN) has held its earnings gap of ten bucks created on February 2nd.
The top of the gap is support at $167.73.
It is currently testing its most recent high at $175, which will be resistance.
Thursday’s action created a rising window, or gap, which will now be new support at $171.77:
It also closed over my pitchfork resistance.
Once it closes above $175, the next level of resistance is the previous high of $188.
After $188, $200 will be in sight.
A close below $167, next support will be $161.42.
I am bullish AMZN here.
Licia
Did you know Amazon is worth 1.74 trillion dollars? I did not, Ill be honest …I knew it was a trillion dollar company but I had it pegged at more like 1.1-1.2 trillion.
Doing a fundamental analysis of Amazon is difficult…its like trying to break down the finances of a wealthy business person that writes off everything he or she can to avoid paying taxes….that is basically what Amazon does.
If the company wanted to…I firmly believe Amazon could drop its PE of 57.83 down to the low 20s. This is a company that purposely loses money on retail to gain market share. So let’s look at some of the other metrics.
Amazon has plenty of cash, has nice positive cash flow, in 2023 the company produces over 36 billion in Free Cash Flow…that is nothing to sneeze at.
Debt to equity ratio is decent:
The company simply makes a lot of money and continues to grow … .mostly on the back of AWS…The Webservices is the company’s cash cow. The company uses the FCF produced by AWS and then uses the profits to lose money in areas it wants to grow.
So with AWS being the cash cow, there are risks….to quote Satya Nadella: every time they enter a new business we get a new client.
Amazon is maturing…its time for the company to decide to actually make money and to stop expanding…focus on the current business…why…take a look at Walmart…they bought Vizio this week…why…smart TVs and shopping….
Walmart is smartening up and is becoming a legitimate competitor in the online space (target…not so much)….
I’d like to see Amazon quite expanding into new markets and focus on the ones it has to maximize value…before they kill the cash cow.
My take…it’s fully valued here…not crazy over valued…not undervalued either…this is one I would sell puts on.
AMZN is joining the Dow Jones Industrial Average…its going to get boring…again sell puts.
Out with Walgreens and in with AMZN
As I write this Amazon.com (Ticker: AMZN) is getting added to the Dow Jones Industrial Average. The last time they did that was with ExxonMobil Corp (Ticker: XOM) and Salesforce.com (Ticker: CRM). Since then XOM is up 240%. I don’t know if that will help WalgreensBoots Alliance (Ticker: WBA) WBA is pretty much a free franchise at this point.
DJIA funds are going to have to add AMZN no matter what and that gave the stock a boost this week. AMZN looks like it wants to go back to all-time highs. As you can see below, implied volatility is trading at year lows for longer dated options. I can call this Fortress AMZN volatility since traders don’t think the stock can collapse. Demand for options is low and that might go for the upside too.
Low volatility rallies make me want to own call calendars, but buy some very cheap, very long term puts to keep in my back pocket in case our new euphoria turns into sadness.
Buy it when you can, not when you have to.
Out on Assignment
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Mark Sebastian
Founder & CEO, Option Pit
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