The stockholders in Amazon have been provided with valuable information by the company management which may determine the way in which they perceive the business in the future. Such news occurs at a period when the stock has been on the downside and investors are considering the long term prospects of the stock. Even though Amazon continues to be a pioneer in e-commerce and cloud service industries, its growth rate and profitability level are keenly monitored. The recent news provides hints on the direction in which the company is going and the problems around it.
It is remarkable that even though Amazon has a quite sound position in the market, it was not considered one of the top ten recommendations on the stocks to buy, offered by the Motley Fool team. This does not imply that Amazon is not a good investment but rather implies that there are better options in the near term at the analyst level. That is an indication to investors to consider that Amazon is no longer priced to grow or whether its valuation already exceeds that of the profit expectations.
Long term investors still have reasons to be “confident” about Amazon following its abilities in AWS, advertising and global reach. Nevertheless, the market action in the short term will probably be affected by its upcoming earnings reporting and forecast. In case the management indicates that the growth is declining or maintaining increased costs, the shares may experience extra selling pressure. Conversely, better than anticipated figures may revive investor confidence any time soon.
In the future, one factor that will be critical to determine will be how Amazon balances between growth investments and profitability. The future returns of the company will be shaped by the capability it has to respond to fluctuating consumer patterns and the threat of competition.
Amazon might not be everyone’s favorite choice at present, but the sheer capabilities of the company along with its brand strength and execution makes it still worthy of consideration when it comes to long term portfolio. Before making major moves, investors ought to pay special attention to what indicates new momentum.
