Markets

Is Amazon.com, Inc. (AMZN) Stock Becoming Too Hot to Handle?

An image of a man at his desk working using two monitors
Credit: Shutterstock photo

InvestorPlace - Stock Market News, Stock Advice & Trading Tips

I am old enough to remember when Amazon.com, Inc. (NASDAQ: AMZN ) shares sold for under $300 and analysts were calling it a Ponzi scheme that couldn't make money. Now, at over $1,000 per share, analysts can't get enough of AMZN stock and it's taking over the world.

Trade of the Day: Amazon.com, Inc. (AMZN) Stock Isn't in the Clear

Source: Shutterstock

The company is due to announce earnings after the market closes July 27, and the top line is expected to come in at $37.2 billion, up 23% from a year ago, with net income of $1.40 per share and hints of more. If the future for Amazon stock looked any better it would have to wear shades.

But not everyone is cheering. Analyst Scott Cleland says Amazon is behaving like a monopolist and he predicts its acquisition of Whole Foods Market, Inc. (NASDAQ: WFM ) will attract "serious antitrust scrutiny." One Congressman has called for hearings.

AMZN Stock: Analysts Ignoring the Bad News

Amazon bulls are holding their ears against potential bad news today just as bears ignored good news four years ago. The idea now is that Amazon stock has "always" beaten estimates so buy, buy, buy.

Piper Jaffrey has a $1,200 price target on Amazon stock based on Google chatter. Long-time Amazon bull Benjamin Schachter of Macquarie Securities sees Amazon becoming the most valuable company on the planet , passing Apple Inc. (NASDAQ: AAPL ).

Amazon is supposedly about to destroy all middlemen , take over the healthcare space and replace the payment space with a mobile payment app. Amazon is already killing the stock of W W Grainger Inc (NYSE: GWW ), the business equipment warehouse, with its Amazon Business offering, which already has over 1 million customers since launching in 2015.

I have been as optimistic on Amazon stock as anyone.

AMZN stock has fueled my retirement account like no other stock, since I bought 100 shares at an average price of $330 a few years ago. But nothing grows to the sky without resistance, and the fact is that Amazon is now meeting increased resistance that the bulls aren't noticing.

Amazon Resistance Not Futile

Amazon Web Services is a juggernaut, but it is not a monopoly. Microsoft Corporation (NASDAQ: MSFT ) and Alphabet Inc (NASDAQ: GOOG , NASDAQ: GOOGL ) are going "up the stack" in cloud, with software and services far beyond infrastructure, and bringing in more cash than AWS. Cloud applications are worth much more than cloud hosting , which is why Salesforce.com, Inc. (NYSE: CRM ) is nearly matching the gains of AMZN stock so far this year.

Amazon's efforts to get into social are rife with potential conflicts of interest. Birkenstock accuses Amazon of pirating its shoes and some consumer advocates say its "Prime Day" deals were actually rip-offs. Its rivals in India may merge to take it on there.

The potential for bad news is there for anyone who cares to read it.

Caution Signs for AMZN?

As numbers get bigger they get harder to move. Resistance grows, not only in the market but in the counsels of government.

Our James Brumley fears Amazon is going in too many directions at once. I am less concerned about that than the "Amazon is going to take over the world" fervor of some AMZN stock bulls.

As our Serge Berger notes, the Amazon bulls are getting reckless . It's a technical bear trade right now, but a single disappointment could greatly upset the Amazon applecart, causing timid bulls to stampede out and today's buyers to be pushed aside.

Everywhere Amazon turns today, it faces entrenched competition. Whether it's in cloud, or in retail, or in payments, in international or in the halls of government, Amazon is facing increasing resistance. At some point that will be reflected in AMZN stock.

Dana Blankenhorn http://www.danablankenhorn .com is a financial and technology journalist. He is the author of the historical mystery romance The Reluctant Detective Travels in Time , available now at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or follow him on Twitter at @danablankenhorn . As of this writing, he owned shares in MSFT and AMZN.

More From InvestorPlace

The post Is Amazon.com, Inc. (AMZN) Stock Becoming Too Hot to Handle? appeared first on InvestorPlace .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

AMZN GWW MSFT AAPL

Other Topics

Stocks

Latest Markets Videos