Amazon.com Inc. (AMZN) struggled throughout 2021, posting a paltry 2.3% annual return. Worse yet, it ended the year at the same price level struck for the first time in July 2020, yielding zero gains for shareholders in nearly 18 months. The malaise wasn’t a big deal, given exceptional 2020 performance, but many are questioning the tech behemoth’s long-term outlook. That seems ill-advised because long-term cycles are now turning sharply in the mega-cap’s favor, raising odds for a rapid advance toward 5,000.
Prime Chief Heads Pharmacy Division
The stock has been whipsawed by consumer behavior that’s changing as a result of the pandemic, with each pause in infections generating more trips to the shopping mall and fewer online buying decisions. Even so, sales are showing few signs of topping out while new initiatives, including Amazon Pharmacy, could stoke strong 2022 growth. The company highlighted this prospect last month, choosing former Prime chief Neil Lindsay to run the operation.
Healthcare Weekly recently confirmed the unit’s potential, with an employer survey indicating that: “70% of the respondents claimed that they were willing to switch to an alternative to the current PBM [pharmacy benefits management] model. Approximately 30% reported they didn’t understand their contract with their pharmacy benefits managers. Amazon can provide the same benefits and functions conventionally offered by PBMs to both healthcare providers and small health plans. The beauty of it all is that Amazon that can do this at a near-zero margin.”
Wall Street and Technical Outlook
Wall Street consensus is wildly bullish, with a ‘Strong Buy’ rating based upon 30 ‘Buy’, 0 ‘Hold’, and 0 ‘Sell’ recommendations. Price targets currently range from a low of $3,800 to a Street-high $4,700 while the stock is set to open Tuesday’s session nearly $400 below the low target. This disconnect with Main Street makes sense, given supply disruptions and endless variants, but it’s time to invest for an endemic world that yields stronger economic growth.
Amazon topped out near 2,000 in the third quarter of 2018 and failed breakout attempts in 2019 and at the start of 2020. An April rally attracted intense momentum buying interest, lifting the stock above 3,500 in September 2020. Price action since that time has carved a sloppy-looking ascending triangle that refused to budge during multiple 2021 upticks. Relative strength is nearing the second buying signal since 2019, which may perfectly align with the passage of the Omicron variant later this quarter.
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Disclosure: the author held no positions in aforementioned securities at the time of publication.
This article was originally posted on FX Empire