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Are Jim Cramer’s Views on Amazon Stock Helping?

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Aug. 10 2019, Updated 7:52 p.m. ET

Jim Cramer has repeatedly shared his views on Amazon (AMZN) stock. On July 29, he called the stock’s dip a “rare buying opportunity,” and he predicts Amazon stock could touch record highs. Could the market be listening to him?

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How Amazon stock has performed

Equity markets crashed on August 5, driven by trade tensions. Although Amazon stock slumped 3.2% that day, it has since risen 3.8%. On July 30, Cramer said that Amazon’s technical “pattern is still bullish.”

Meanwhile, the SPDR S&P 500 ETF (SPY) has risen 3.5% since August 5. Yesterday, Donald Trump tweeted that American businesses could better compete if the Fed were to lower interest rates. It cut rates by 25 basis points on July 31.

Peers’ performance

Amazon peers Apple (AAPL), Alphabet (GOOGL), and Twitter (TWTR) have risen 5.2%, 4.5%, and 4.2%, respectively, since August 5. Apple stock rallied after its third-quarter EPS of $2.18 beat analysts’ estimate of $2.10. Similarly, Alphabet’s second-quarter EPS of $14.2 surpassed analysts’ estimate of $11.30, and Twitter’s Q2 revenue of $841 million beat their estimate by about 1%.

Facebook (FB) and Netflix (NFLX) have risen 4.6% and 2.7% since August 5. In the second quarter, Facebook’s EPS of $1.99 beat analysts’ mean estimate of $1.88. Netflix stock tumbled after reporting lower-than-expected Q2 paid subscription growth.

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Cramer’s Prime Day advice on Amazon stock

Cramer said on July 16 that during Amazon Prime Day, investors should sell Amazon stock. He said, “I think you’d be shocked at the values.” He added, “I think that one of the things that you always have to recognize is that they just, the prices that they offer are unbeatable. So once again—but remember I did say that Amazon should be sold at Prime day, not bought—and that’s going to prove to be right.” Amazon stock slumped 1.4% on July’s Prime Day.

Amazon’s robust growth outlook

Whereas Cramer has advised selling Amazon stock on Prime Day, he saw its recent slump as a buying opportunity. He also mentioned that markets reacted negatively to Amazon’s second-quarter earnings. Amazon stock has fallen 8.4% since its Q2 earnings release.

However, the company seems to be heading in the right direction. Amazon’s dull second-quarter performance was due to its transport costs rising as it develops its one-day logistics network. The company surpassed its cost target in the quarter. Further, it expects these costs to persist in future quarters, as reflected in the company’s third-quarter guidance.

As the company develops its infrastructure, it aims to optimize costs for a leaner structure that should propel the company’s future growth. Robust growth by Amazon Web Services should also give it a boost. Analysts are optimistic about Amazon’s long-term growth prospects, and expect its earnings to rise by about 17% this year, 41% in 2020, and 49% in 2021.

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