Amazon (NASDAQ: AMZN) was one of just a handful of stocks that ended the first quarter in the black.
The e-commerce giant closed Q1 up 5.43% even as the broader market experienced its worst first quarter ever as demand for Amazon’s online shopping business and cloud services pushed demand for the stock.
Still, as the S&P 500 hit its high on February 19, so too did Amazon, and the stock is now down more than -12% since then.
However, Ascent Wealth Partners managing director Todd Gordon says that Amazon’s chart is pointing to a move back towards record highs and that the stock has “held up incredibly well” as the rest of the market has fallen.
According to Gordon, Amazon’s weekly chart shows that the stock has been trading in a sideways range, and is trading above its 50-week and 200-week moving averages, which Gordon says is “a pretty rare find” in the current market.
Looking at the daily chart, the stock is still seen trading above the 200-day average.
Given the surge in demand for Amazon’s online shopping business and the technicals, Gordon sees the stock pushing back up to the $2,100 level, putting it on track to return to its February high of $2,186.
Gordon says his firm holds Amazon in its portfolios, and says one way investors could acquire the stock is through options.
Gordon notes that implied volatility means the price of options is elevated, and thus investors should stay away from calls. Instead, Gordon advises investors sell the May monthly 1,950-strike put for a credit that would net around $103, and then could use that income to buy the May monthly 2,100-strike call for a net credit of around $48.
With this set-up, as long as Amazon closes above the $1,895 break-even point on the May 15 expiration, it will be a profitable trade.
Gordon isn’t the only expert who sees upside ahead for Amazon.
Aegis Capital’s Victor Anthony this week issued a research report on the stock, maintaining his Buy rating and issuing a $2,525 price target – 31.6% higher than the price as of this writing.
Anthony says Amazon “is one of the best investments for the next five years” due in part to the growth seen in Amazon Web Services.
The analyst notes that Amazon’s cloud business will benefit from “increased in-home entertainment services, business communications, and more healthcare and government utilization,” and sees revenue growth of between 37% and 39% when the company reports its first quarter earnings.