Amazon plans on selling consumer packaged goods online, going head-to-head with big-box retailers. What does that mean for the stock?
Never mind its potential army of drones: Amazon is taking on a bigger battle. The e-commerce behemoth wants to start selling consumer packaged goods in bulk.
Published reports say Amazon is expected to launch a new line of business in 2014 called Pantry. Amazon Prime customers will be able to order consumer packaged goods (CPGs) like ketchup or toilet paper, have it packed into set-sized boxes, and shipped to their homes.
Amazon will face huge competitors like Costco, Wal-Mart's Sam's Club, and BJ's Wholesale Club. Though Amazon isn't about to open a big-box store anytime soon, all three of those retailers already offer online sales.
Meanwhile, analysts at ISI upgraded Amazon to a "strong buy", saying, "We are upgrading Amazon to Strong Buy as we believe North American revenues can grow $3bn in 4Q from just $2bn in 3Q as 15mn Prime members really leverage their membership."
More revenues are a welcome thing for any company, but especially Amazon. While Amazon's 2013 revenues are expected to come in at $74.9 billion, they will barely eke out a profit; earnings per share for the year are forecasted at $0.73 for a stock trading at around $386.
"I think the biggest problem with Amazon is its valuation but people don't seem to care," says CNBC contributor Gina Sanchez, founder of Chantico Global. "Their biggest problem is to figure out how to do it by keeping shipping costs low."
While shares of Amazon are up 54% this year, the stock's technicals appear to be ready to give a sell signal, according to CNBC contributor Andrew Busch, editor and publisher of The Busch Update.
Busch sees the stock as having traded within a well-defined trend channel for three year before breaking out this past October. But, on the shorter-term, though the 10-day moving average is above the 30-day moving average, the gap between them is closing.
"It's not a bad opportunity to turn around and try sell this thing anticipating it will break back down below the 30-day at $370," says Busch. "That's the best you can do when you get a parabolic price move."
To see the rest of Sanchez's fundamental analysis and Busch's charts on Amazon, watch the video above.
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