Amazon (NASDAQ:AMZN) stock slipped below $100 in after-hours (down 12.73%) on Thursday. The slump followed disappointment on multiple fronts, including weaker-than-expected Q3 revenues, the slowdown in the cloud business, and lower-than-expected Q4 guidance. However, this decline presents an excellent buying opportunity.
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Why AMZN Stock Looks Attractive
Undoubtedly, investors’ confidence is bound to be low on Amazon stock following the Q3 financials and Q4 guidance. However, the slump in AMZN stock makes it attractive on the valuation front. AMZN under $100 indicates that negatives and uncertainties are priced into the stock.
Apart from its attractive valuation, AMZN’s leadership position in e-commerce and cloud clouding makes it a solid long-term investment. Despite the pullback in near-term demand for AWS (Amazon Web Services – its cloud business), the long-term prospects of the segment remain strong.
Its continued investments and expansion of AWS infrastructure footprint and digital shift bode well for growth. Moreover, AMZN’s management stated that the new customer pipeline remains healthy, which is a positive.
Further, AMZN’s top line and profitability are expected to benefit from its high-margin advertising business. In Q3, Its advertising services revenue growth reaccelerated and surpassed Street’s forecast (reported ad revenue of $9.55 billion compared to analysts’ estimate of $9.48).
Improvement in the economic environment, easing of the currency headwinds, and easier comparisons in the consumer business could give a significant lift to AMZN stock.
Bottom Line: Are Amazon Shares a Good Buy Now?
The pullback in Amazon’s shares and its solid fundamentals keep analysts bullish. AMZN stock has received 30 Buy and one Hold recommendations for a Strong Buy consensus rating. Further, its average price target of $169.32 implies 52.6% upside potential.
Amazon, without a doubt, is a solid long-term stock. However, macro and currency headwinds could remain a drag in the short term. Given the short-term challenges, AMZN stock has a Neutral Smart Score of seven out of 10 on TipRanks.
