Cramer during today’s Mad Money used technical analysis to give viewers a long and short-term outlook for Amazon , as well as the right buying point. The monthly chart shows the stock breaking out on increased volume, even surpassing highs reached during the dot-com boom of the late 1990s. Remember, more volume is a sign of legitimacy among technicians, so the monthly chart seems to indicate a continued surge in AMZN.
The daily chart is also positive. Late last week, the stock flirted with $125, the starting point for Amazon’s breakout back in October. But instead of dipping below that level, AMZN bounced higher. Also, that decline to near $125 was a product of much lower volume, further lending credibility to the stock’s overall rally during these last few months.
So where do the charts say to buy AMZN? Right here, in fact, according to the weekly chart. The weekly shows the stock trending higher, so even a decline is worth buying. In fact, anywhere between $126 and $119, which looks like the floor for Amazon right now, should be considered a gift, Cramer said. The only factor that could change the technical case would be if the price fell below $119 on over 100 million shares traded in weekly volume. That would then legitimize the selling rather than the buying.
As for the fundamentals, they paint just as strong a picture. E-commerce is booming, Cramer said, especially this holiday season, and Amazon has turned itself into the online Walmart. This isn’t merely a book and music seller anymore. Amazon can now beat the world’s largest retailer on price. That’s partly because three new distribution facilities have helped to bring down the cost of order fulfillment, thereby sending profits up.
These lower costs and the boost in 2009 holiday sales could mean Amazon will grow earnings at a 30% rate in 2010, Cramer said, which is a healthy jump from this year’s 25%. He called 30% a “magic number” because few stocks generate that kind of growth and money managers will open their wallets for it – maybe paying as much as 60 times earnings.
Take that number and multiply it by Cramer’s 2010 earnings prediction for Amazon, $3.60 a share, and this becomes a $216 stock lying in wait at $134. That’s a full $82, or 60%, higher than the present level.
So, “If we get any kind of pullback,” Cramer said, “back up the track and buy even more” Amazon.com.
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