Analysis: MS AMZN VZ MA WMT

After you receive this alert, we will make the following trades:

  • Sell 250 shares of Morgan Stanley (MS)  at or near $91.90. Following the trade, the portfolio will own 1,000 MS shares, roughly 2.5% of the portfolio.
  • Buy 110 shares of Amazon (AMZN)  at or near $144.75. Following the trade, the portfolio will own 710 AMZN shares, roughly 2.75% of the portfolio.

With last night's market close, shares of Morgan Stanley have added to their recent run-up, bringing the total over the last nine weeks to more than 26%, double-digit outperformance vs. the S&P 500 over the same time frame. The continued move higher has only extended the degree to which MS shares are overbought vs. our recent trimming on Aug. 9.

This time around, instead of using that run-up to add to shares of Verizon (VZ) , like we did in that last trade, this time we're picking up a few shares of Amazon instead. We've shared with members we would look to rebuild the portfolio's position in Amazon after it reported its June-quarter results, to take advantage of what should be very favorable year-over-year comps for the current quarter given the timing of Prime Day this year vs. last year.

The recent Mastercard (MA)  SpendingPulse data for July confirmed the surge in digital shopping for the month and we continue to see digital shopping taking wallet share during not only the back-to-school shopping season, but also the year-end holidays. As Walmart (WMT) indicated Tuesday morning, it is seeing shoppers trade down and we see that playing into one of Amazon's strengths. Also helping Amazon is the news it is increasing fulfillment fees for third parties between Oct. 15-Jan. 14, matching the year-end holiday shopping season.

The longer-term outlook also keeps us bullish as well. Per Bloomberg Intelligence, U.S. e-commerce sales look to grow at a 13% compound annual growth rate to $2.27 trillion in 2025 vs. $1.22 trillion in 2020. Amazon is expected to reach $1.2 trillion in gross merchandise volume by 2026, driven by the potential for double-digit third-party gains as more merchants shift to e-commerce and join the platform. Meanwhile cloud adoption continues and we also like Amazon's growing advertising as well as healthcare related businesses.

Should AMZN shares pull back to the $135 level or we see indications our $175 price target could be too conservative, we'd look to revisit the current "Two" rating on the shares.

Members may notice we are not making an even dollar swap between the returned capital with the MS sale and what's being put to work with the AMZN buy. This will temporarily add modestly to the portfolio's cash position, but we would share we expect to add a new position to the portfolio before the week is out.

(Please note that we are looking to execute these trades at or near the share price mentioned above. Once the trade is completed, subscribers can see the trade's executed price here. Be sure to toggle the chart to sort by Purchase Date.)

MS, AMZN, VZ and MA are holdings in the AAP.