Is Amazon Stock Discounted Right Now?

Amazon.com, Inc. (NASDAQ:AMZN) stock fell 1.11% on November 20. The tech sector suffered another brutal selloff on the same day as the NASDAQ dropped 1.7% on the same day.

Amazon recently selected the location of its new corporate headquarters, what it named Amazon HQ2. The company chose Long Island, New York and Crystal City, Virginia as the dual location. Each location will boast about 25,000 workers. Amazon also announced its third-quarter results on October 25.

In the third quarter Amazon reported earnings per share of $5.75 which blew away projections, but revenue came in slightly below at a whopping $56.6 billion. Amazon gave fourth-quarter revenue guidance between $66.5 billion and $72.5 billion which also fell below expectations. On the day of its earnings release Amazon suffered its biggest single-day decline since January 2014.

Shares of Amazon have now dropped 20.3% over a three-month span as of close on November 20. Looking at its technicals, Amazon stock has been overvalued for some time. Its price-to-earnings and price-to-book value currently sit at nearly double the industry average. Nonetheless, the stock has managed to power through this kind of chatter in the past.

Investors should be very cautious in the current environment. A recent report from Morgan Stanley argued that the "buy the dip" strategy has encountered major resistance and recommended that investors consider selling rallies going forward. Amazon’s monster growth trajectory makes it a tempting pick up, but investors should exercise patience in the final weeks of 2018 as this selloff worsens.