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Amazon trades at COVID crash lows amid bearish sentiment

The Amazon's stock price keeps falling, however, for long-term investors it might be a good entry point.

The anti-tech sentiment continued this week, pushing the stock price of Amazon to the lowest level since March 2020, when the world first experienced the global COVID lockdown.

Investors are concerned about Amazon’s (AMZN) still-bloated expenses and what is turning out to be a poor holiday shopping season.

The IT giant’s stock is hanging around a new 52-week low and is down 50.3% year to date, as per data from Yahoo Finance. The stock’s performance rivals those of its closely watched FAANG (Facebook/Meta, Apple, Amazon, Netflix, and Google) peers, as Meta Platforms has fallen 63% and Netflix has plummeted around 53%.

Amazon stock has lost almost 12% in December alone, under pressure most recently from a weak government report on November retail sales.

Weak earnings report and guidance

Amazon revealed on October 27 that it underperformed analyst projections for the third quarter, as top-line growth continued to decelerate and costs remained excessive. For the fourth quarter, Amazon expected revenue between $140 billion and $144 billion as opposed to the $155 billion that experts had predicted.

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The following day, stock prices dropped by roughly 10%. In an effort to get its cost structure under control, Amazon allegedly let off over 10,000 employees in November.

“We believe that Amazon has the most downside in our mega-cap coverage given its exposure to inflationary cost headwinds and a potential impact from slowing consumption,” Jefferies tech analyst Brent Thill wore in a note to clients.

EU anti-trust probe ends

After agreeing to improve its approach to third-party merchants on its marketplace, Amazon agreed to resolve two European Union antitrust complaints without a monetary penalty.

The deal concludes an inquiry into Amazon’s use of data from individual retailers on its marketplace, which, according to the EU, allowed the retail giant to assume less risk than its rivals.

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Moreover, Amazon also promised to address concerns that its Buy Box for highlighting specific items and Prime unfairly favored its own retail company and marketplace vendors that utilize Amazon’s logistics and delivery services. Included in the pledges is the promise to show a second Buy Box directly beneath the first.

According to Bloomberg, the resolution is the latest round in a long-running, pan-European crackdown on the market dominance of internet companies like Google, Apple Inc., and Meta Platforms Inc., which has resulted in repeated investigations, penalties, and strengthened legislation.

While the arrangement eases some of the regulatory pressure Amazon has been under due to allegations that it has become too dominant in European eCommerce, the internet corporation remains under the scrutiny of Germany’s Federal Cartel Office and the United Kingdom’s competition authority.

Technically speaking, the price is now testing, possibly the last major support of 2020 lows near $86. If bears push the price below that level, we might see another leg lower toward 2019 lows at $67, implying a drop of circa 20%.

Amazon weekly chart

Amazon weekly chart, source: author´s analysis, tradingview.com

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