Amazon Erases a Year of Gains—2 Reasons the Market's Wrong

Key Points

• Amazon shares are down more than 12% this year and over 20% from November’s all-time high, drifting back toward levels last seen nearly a year ago.
• The stock’s RSI has sunk into the low 20s, marking one of its most oversold readings in almost four years.
• Analyst support remains overwhelmingly bullish, with price targets implying close to 60% upside from current levels.

After months of steady pressure that intensified in recent weeks, Amazon.com Inc NASDAQ: AMZN is back to where it was at the start of last March. Not only are shares down more than 12% this year alone, but they’re down more than 20% from November’s all-time high, effectively wiping out the gains of the past 12 months.

For a company with so much going for it fundamentally, the stock simply cannot seem to catch a break. Sure, investors have been rotating out of mega-cap tech; there are increasing concerns about Amazon’s capital expenditure plans, and sentiment across the sector has cooled materially. But beneath the surface, the current setup is beginning to look extreme. Here are two reasons to believe the market has gone overboard.

Reason #1: The Stock Is Extremely Oversold

The technical setup is screaming oversold right now. Amazon’s relative strength index (RSI) has slipped into the low 20s, marking its lowest reading in nearly four years. That level of oversold pressure is rare for this stock, particularly given that over that same period, the company has consistently delivered strong earnings and reinforced its growth story.

Historically, when Amazon’s RSI has reached this kind of technical exhaustion, it doesn’t stay there long. Extremely oversold readings, that is, any RSI reading below 30, have tended to coincide with temporary lows rather than midpoints in a breakdown. 

In April of last year, for example, a brief flash below 30 on the RSI preceded a rally of roughly 60%. In August 2024, another sub-30 reading was followed by a comparable 60% move.

Go back further to November 2022, and the rebound was even more dramatic. 

Now obviously, history doesn’t have to repeat itself, but it can often rhyme, and this is a pattern worth respecting. When sentiment has become this one-sided in the past, it has marked an opportunity. If Amazon shares can stabilize in the coming sessions and get the RSI to begin turning back north, that would be an early sign that the bullish accumulation has begun.

Reason #2: Analysts Are Not Backing Down

If the technical case is strong, the analysts' fundamental support makes the current setup even harder to ignore. Rarely is there such a wide disconnect between what the market is doing to a stock and what analysts are saying it should do.

Indeed, a slide of this magnitude would normally see rating downgrades cascading along Wall Street as analysts throw in the towel and admit they got it wrong.

Instead, the opposite has happened. In just the past week, teams from Daiwa Securities Group and New Street Research reiterated their Buy ratings, while Argus did the same the week prior. Price targets among the bullish camp stretch as high as $325, which, with the stock currently trading below $200, implies nearly 60% in potential upside.

That kind of asymmetry is difficult to dismiss, particularly for one of the leading mega-cap tech companies. In terms of why they’re sticking to their guns, there is near-universal conviction around the strength of Amazon’s AWS business, where growth is accelerating rather than slowing. Add in the company’s structural moat in e-commerce, its diversified revenue streams, and its expanding advertising footprint, and the long-term thesis remains intact.

Watching for the Turn

Concerns around increased capital expenditure were clearly a catalyst for the recent selloff. But at these levels, much of that fear appears priced in. In fact, the pullback has driven Amazon’s price-to-earnings (P/E) ratio below 30 for the first time in years, making the valuation look materially more attractive than it has in some time. It would be difficult to maintain such a bullish stance if analysts were turning their backs en masse. Instead, they’re almost all doubling down.

For now, the setup hinges on stabilization. If the stock can show signs of holding near current levels and begin carving out a base rather than sliding to fresh lows, the bullish case strengthens quickly. With shares pressing toward a 52-week low, the RSI at multi-year extremes, and analysts calling for as much as 60% upside, the risk/reward profile is almost too good to ignore.