AMZN Forensic Analysis

PART 1: TRADING EXECUTION

1. Trading Setup & Entry Strategy

Trend Status: BULLISH_UPTREND (Price > 50SMA > 200SMA) Momentum: HEALTHY (RSI 55.30 - Not Overbought) Conviction: HIGH (8.5/10)

The Trade: LONG on support test. The technicals show a robust uptrend supported by accelerating AWS fundamentals. The recent consolidation allows for a low-risk entry near the moving averages.

• •Entry Zone 1 (Aggressive): $232.00 - $232.52 (Current Market Price). Allocate 30% of position size here to secure exposure.
• •Entry Zone 2 (Ideal): $230.40 - $230.60 (Confluence of 50-Day SMA and 5-Day SMA). Allocate 50% of position size here. This is the "institutional support" line.
• •Entry Zone 3 (Value): $227.20 (10-Day SMA). Allocate remaining 20% if volatility spikes.
• •Stop Loss: $221.00 (Hard Stop). This is just below the Lower Bollinger Band ($221.46). If price breaks this, the short-term momentum structure is broken.
• •Take Profit 1: $242.00 (Previous swing resistance/psychological level).
• •Take Profit 2: $255.00 (Blue sky breakout target).
• •Max Hold Time: 3-5 Weeks (Into Q4 Earnings run-up).

2. Executive Summary

Thesis: AMZN represents a "Hidden Margin Expansion" story. The headline Operating Income was flattish ($17.4B) due to a one-time $2.5B FTC settlement and $1.8B in severance. Adjusting for these, operating margins are expanding significantly. AWS revenue growth has re-accelerated to 20% YoY, confirming the AI CapEx cycle is converting to revenue. Technically, the stock is in a "Goldilocks" zone: clear uptrend, but RSI (55) suggests it is not yet overextended.

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PART 2: DETAILED RESEARCH

3. Recent Material Events (8-K Analysis)

• •Oct 30, 2025 (8-K): Filed $5.0B unsecured revolving credit facility. Bullish/Neutral. Standard corporate hygiene to backstop commercial paper; indicates ample liquidity access.
• •Nov 20, 2025 (8-K): Routine filing, no material adverse disclosures.

4. Insider Trading Activity

• •Activity: Routine selling observed in late November/early December (Form 4s filed 11/25, 12/03).
• •Signal: NEUTRAL. This timing aligns with year-end tax planning and RSU vesting schedules. There is no anomalous "dumping" of shares that contradicts the bullish thesis.

5. Current News & Market Context

• •Drone Delivery Halt (Italy - Dec 28): Amazon halted drone delivery plans in Italy. Positive. While optically negative, this confirms Management's discipline in cutting unprofitable "science projects" to protect FCF.
• •AWS AI Momentum: News flow continues to highlight AWS as a primary beneficiary of AI inference demand. The 20% YoY AWS growth in the 10-Q confirms this narrative is realizing in the P&L.

6. Business Model Analysis

• •Revenue Mix: North America (59%), International (23%), AWS (18%).
• •Key Shift: AWS is only 18% of revenue but drove 66% of Operating Income ($11.4B of $17.4B). The business is increasingly an AI/Cloud utility subsidized by a massive retail logistics network.

7. Financial Health (Q3 2025)

8. Valuation Analysis

• •Current Price: $232.52
• •Reverse DCF: At current price, the market implies a ~14% compound growth rate for the next 5 years. Given AWS is growing at 20% and International Retail at 14%, this pricing is fair to slightly undervalued.
• •Comparables: Trading at a premium to retail peers but a discount to pure-play AI software, appropriate for a hybrid model.

9. Competitive Position

Amazon's moat is widening. The Widowmaker Rule applies to competitors here: Betting against Amazon's logistics network or AWS dominance has been a losing trade. The re-acceleration in AWS growth suggests they are successfully defending market share against Azure/Google Cloud.

10. Management Quality

• •Cost Discipline: Jassy continues to cut bloat (e.g., halting Italy drones, severance charges).
• •Capital Allocation: Heavy investment in AI infrastructure ($97B CapEx YTD) is aggressive but aligned with AWS growth. The $2.5B FTC settlement clears a major regulatory overhang.

11. Risk Factors

• •CapEx Intensity (High): Spending $97B on CapEx YTD is massive. If AI monetization slows, depreciation will eat earnings for years.
• •Regulatory (Medium): The FTC settlement resolves one issue, but antitrust scrutiny remains permanent noise.

12. Forensic Accounting Flags ⚠️

• •Earnings Quality (⚠️): Net Income ($21.2B) is inflated by a $7.2B valuation gain on Anthropic (non-marketable equity). This is non-cash. Traders must focus on Operating Cash Flow ($130.7B) rather than Net Income to gauge true health.
• •Useful Life Change: Note 1 mentions increasing server useful life to 5 years. This artificially boosted Net Income by $298M in Q3. Be aware that earnings are slightly "managed" via depreciation schedules.

13. Technical Analysis & Trade Timing

• •Trend: BULLISH. Price is above the 50-day ($230.41) and 200-day ($216.32) SMAs.
• •MACD: Histogram is positive (+0.7807), indicating bullish momentum is holding.
• •RSI: 55.30 (Neutral). This is the ideal entry zone for a momentum trade. It is not overbought (>70), meaning there is fuel left in the tank for a move to $245-$250.
• •Support: The 50-Day SMA at $230.41 is the "line in the sand." Institutional algos will likely defend this level.

14. Short-Term Trading Strategy (2-5 Days)

• •Timeframe: SWING_2_5_DAYS
• •Position Sizing: 4% of Portfolio
• •Strategy: Buy the pullback to the moving average cluster.
• •Execution:
  1. •Enter 30% at Market ($232.52).
  2. •Limit Buy 50% at $230.50 (Front-running the 50SMA).
  3. •Limit Buy 20% at $228.00 (Volatility catch).
• •Take Profit: Trim 50% at $236.70 (Upper Bollinger Band), let runner go to $242.
• •Stop Loss: HARD STOP at $221.00.
• •Risk/Reward: Risking ~$11 to make ~$12-$15 (approx 1:1.3 on base case, 1:2 on runner).

15. Catalysts & Timeline

• •Q4 Earnings (Late Jan/Early Feb): The next major volatility event. Position is designed to capture pre-earnings run-up.
• •Dec/Jan Effects: January Effect often favors laggards, but AMZN's momentum likely carries through due to tax-loss selling recovery if any occurred (unlikely given year-to-date performance).

18. Investment Recommendation

RATING: BUY Conviction: 8.5/10

Fundamentals (AWS acceleration) and Technicals (Trend support) are aligned. The forensic flags (Anthropic gains) are noted but do not detract from the core Operating Cash Flow strength.

One-Liner Thesis: "Buy the 'hidden' margin expansion story—AWS re-acceleration to 20% and cost-cutting measures are masking the true profitability power, while technicals offer a clean entry at the 50-day moving average."