Amazon Stock Breakout: Potential Run to $200

Key Points

• Shares of Amazon have started to turn back north after taking a breather.
• Solid earnings and a plan to increase market share have been bolstered by a newly announced partnership with Grubhub.
• The longer-term uptrend remains strong, and investors should be excited. 

Despite setting a fresh all-time high at the start of the month, shares of Amazon.com Inc NASDAQ: AMZN actually spent most of May on the back foot. In fact, for a while, it looked a little scary, especially as the broader market stayed buoyant. Consider, for example, the 7% that Amazon shares gave up between May 9 and May 31. During that same time frame, the benchmark S&P 500 index managed to gain 2%.

Dealing with a sliding share price is challenging enough when the entire market is retreating, but it becomes an entirely different issue when the rest of the market is advancing. However, as we wrote in our article on Amazon last week, the dip had “all the hallmarks of a standard mid-rally breather.”

Grubhub Partnership Expands Amazon's Market Reach

One week later, this theory is starting to look confirmed. Amazon shares dipped to a low of $174 on the final day of May before rallying into the close. This kind of price action is among the most bullish you can hope to see, especially in circumstances such as this. Remember, Amazon delivered solid Q1 earnings that topped analyst expectations and impressed Wall Street with its progress in the artificial intelligence (AI) industry. 

Their core Prime business is also ticking over nicely and got a nice boost over the past week. A newly announced partnership with food delivery app Grubhub will further increase Amazon’s penetration into the consumer market. 

Already the kingpin of online shopping and general e-commerce, not to mention a leading cloud computing provider, Amazon users in the US will now be able to place orders from most of the restaurants currently available on Grubhub through the Amazon website and app. 

They’ll also receive a complimentary Grubhub+ membership and benefit from paying no delivery fees on relevant orders. This is a solid step by Amazon as part of its drive to expand on existing services and, in particular, add value to its ever-popular Prime membership option. 

Amazon Stock Poised for Further Gains

With more than a 4% gain in its share price since the Grubhub partnership was announced, it’s fair to say that Wall Street likes it, too. Indeed, with a run of green days now under its belt, we could be looking at the perfect entry point. As we wrote last week, “a run of green days, with closes near or at the high, will confirm the uptrend is back.”

As we head into the final two days of trading this week, that’s exactly the kind of pattern that’s emerging. And the best news for investors? There is still plenty of room for Amazon shares to run. Every single analyst update since February has given the stock a price target of at least $200, with some as high as $220 and even $245. The most recent target came last week from analyst Ivan Feinseth at Tigress Financial.

Why Risk-Averse Investors Should Consider Amazon Now

Like all the others, Feinseth is impressed with how well the company is positioned to capitalize on the booming AI industry while maintaining its market foothold in the consumer space. The partnership with Grubhub will be viewed as another good step in this direction, so it’s understandable that Feinseth had no problem boosting his price target by 16%. At $245, though, that’s still pointing to further upside compared to the shares that closed on Wednesday at nearly 35%. 

That should be enough to tempt even the most risk-averse investor, especially when you consider that there’s not a single analyst saying the stock is fairly priced under $200. We said it last week, and it holds true today as well; we might well be “witnessing some of the last weeks that Amazon shares will trade below $200."