Amazon (NASDAQ:$AMZN) Slides 4% Amidst Cloud Growth SlowdownAmazon (NASDAQ: AMZN) shares slid nearly 4% in pre-market trading on Friday, as investors reacted to a slowdown in the company's cloud growth and a subdued sales forecast for the current quarter. The dip comes despite strong performance in Amazon's retail segment and a broader technical breakout that suggests the stock may be poised for a significant upward move in the coming months. Let’s dive into the technical and fundamental factors driving Amazon’s current market dynamics and why this dip could be a buying opportunity for long-term investors.
Cloud Growth Slowdown Weighs on Sentiment
Amazon Web Services (AWS), the company’s cloud computing division and a key profit driver, reported a 19% year-over-year revenue increase to $28.79 billion for the quarter. While this growth is impressive, it fell slightly short of analyst expectations of $28.87 billion, according to LSEG data. This miss has raised concerns about the competitive pressures AWS faces from rivals like Microsoft Azure and Google Cloud, as well as emerging low-cost competitors such as China’s DeepSeek.
Technical Outlook
From a technical perspective, Amazon’s stock chart tells an intriguing story. As of Friday’s pre-market trading, AMZN was down 2.78%, but the stock recently broke out of a falling trend channel, signaling a potential reversal of its previous downtrend. While the stock has yet to capitalize on this breakout, the current dip could be interpreted as a "shakeout" before a significant upward move.
Key technical indicators support this bullish thesis:
- Relative Strength Index (RSI): The RSI remains strong at 60, indicating that the stock is neither overbought nor oversold and has room to climb.
- Moving Averages: AMZN is trading well above its 50-day, 100-day, and 200-day moving averages, a sign of strong underlying momentum and bullish sentiment.
This technical setup suggests that the pre-market dip may be a temporary pullback rather than the start of a sustained downtrend. For traders and investors, this could present an attractive entry point.
Strong Revenue and Earnings Growth
Amazon’s financial performance in 2024 has been impressive, with revenue reaching $637.96 billion, a 10.99% increase compared to the previous year’s $574.79 billion. Earnings surged by 94.73% to $59.25 billion, reflecting the company’s ability to scale profitability even as it invests heavily in growth areas like AI and cloud infrastructure.
The company’s 12-month forward price-to-earnings (P/E) ratio of 37.3 is higher than peers like Alphabet (22.7) and Microsoft (30.1), but this premium is justified given Amazon’s diversified business model, dominant market position, and long-term growth potential.
Analyst Sentiment: Strong Buy Rating
Wall Street remains overwhelmingly bullish on Amazon. According to 43 analysts, the average rating for AMZN stock is a "Strong Buy," with a 12-month price target of $254.3, representing a 6.48% upside from the latest price. At least seven brokerages raised their price targets following the earnings report, bringing the median target to $260.
Analysts are optimistic about Amazon’s ability to navigate near-term challenges and capitalize on long-term growth opportunities in AI, cloud computing, and e-commerce. The company’s heavy investments in AI infrastructure, while weighing on margins in the short term, are expected to pay off handsomely in the coming years.
