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There’s a pattern I’ve been tracking this year that keeps showing up in the most interesting places.
It’s simple…
When a stock’s revenue is exploding but its price-to-earnings ratio is dropping to multiyear lows, you’ve got a fundamental disconnect that the market eventually has to reconcile.
Right now, Amazon (AMZN) is showing that exact setup. Let me walk you through why this matters — and why it reminds me of two earlier calls that worked out pretty well.
The Setup That Keeps Working
Amazon’s forward P/E ratio is trading at its lowest level in a decade. Meanwhile, its revenue has been exploding. That gap between business performance and valuation is what has my attention.
While other tech names like Nvidia (NVDA), Dell (DELL) and Intel (INTC) have seen massive price moves, Amazon has been roughly flat by comparison. The stock has been underperforming while the business has been outperforming.
Amazon is also hard to categorize. Is it tech because of Amazon Web Services? Discretionary because of online shopping? Communications because of Prime Video and Thursday Night Football?
It’s a mixed bag, but that doesn’t change what the valuation is telling us.
More importantly, we’ve seen this pattern before. The last stock we examined with this exact setup was Robinhood (HOOD). Back in March, I identified it at $72 with the same basic characteristics — a beaten-up share price paired with rising revenue.
Robinhood has since climbed as high as $125 before pulling back some. If it reaches $140, it will have nearly doubled in under a year. For a large-cap stock, that’s not normal — and it shows what can happen when the market finally closes a valuation gap.
ServiceNow (NOW) offered another example. I bought it in the $90s, and it later reached $130 — a gain of roughly 45%.
Both stocks were more beaten up than Amazon, so their rebound potential was higher. But the underlying setup was the same: improving fundamentals, compressed valuation and a stock price that had yet to catch up.
What I’m Watching Now
Technically, AMZN is approaching its 50-week moving average, which has historically created attractive buying opportunities. The chart remains in a strong long-term uptrend, even though the stock has moved sideways recently.
That doesn’t mean Amazon is definitely going up tomorrow or next week. This valuation disconnect has persisted for years, and timing still matters.
October is almost here, and I’m watching the back half of the month closely. I’ve circled Oct. 20 as a potential inflection point within the broader market cycle.
If we get the flush I’m anticipating around that window — the kind of pullback that can develop before the midterm cycle heats up — Amazon could offer an even better entry.
The upside might not be as dramatic as Robinhood or ServiceNow, but when revenue climbs while valuation compresses, the market eventually tends to catch up.
That’s the pattern, and Amazon fits it right now.
Graham Lindman
Graham Lindman Trading
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