The performance of Amazon’s large-cap stocks witnessed a bullish trend this year. The increase went up to 78%, which suggests that it nearly doubled from the March lows. Inevitable factors, such as the Corona-Virus pandemic did not halt the functioning of Amazon due to its unique stance and hence, they weren’t hit as hard and continues to prosper.
Due to its diverse product-umbrella, Amazon has innovated and redesigned products, such as Amazon Web Services according to the prevalent environmental conditions. With the aid of such diverse and multi-level products, Amazon was able to cater outstandingly during the Coronavirus crises, by inculcating the cloud-based technology in their framework, thus providing virtual workplaces to a plethora of its professionals.
Although the continuation of keeping the stocks on a persistent value is an arduous task, their stocks still remain moderate when it comes to their value, at least for another few quarters.
Coronavirus has continued without respite, but that did not affect Amazon in a severe manner and under these unavoidable perils, Amazon’s stock still managed to gain 7% more on its value, thus exceeding analysts’ expectations for the future of Amazon shares. This sent a very promising vibe about Amazon in the market, hence triggering the investors to rely even more upon it when it came to investing in shares amid crisis.
Amid all this success, Amazon has been under constant scrutiny. Antitrust hearing before the House Judiciary Committee was called, and Jeff Bezos – along with other Tech leads – defended their companies.
Whilst all the outshining performance, there are some factors that would help you decide whether or not you should buy Amazon stocks.
Amazon at a Glance:
Due to the looming health crisis, Amazon made $89 billion in net sales, and out of this amount, $4 billion were spent on the exigency at hand, which is the pandemic. $89 billion represents a 40% rise and this came as a surge due to health-related shopping that caused a hike in the company’s earnings and performance. The Wall Street expectations were yet again surpassed by Amazon, in an unprecedented event. This is how a company like Amazon alters threats into opportunities.
The current environment increased the demand for Amazon’s diverse products, and this, in the longer-run has affected the demand-supply curve. Delays have been witnessed in shipping the products to their destinations, and this in return, gave the competitors a cushion to revamp their performance and fill the void created by supply and logistical deficiencies.
Pros of buying Amazon stocks:
1. The well-equipped and tenacious management team, with who can turn the tables in any scenario – says Matthew Fox – founder of Ithaca Wealth Management.
2. The restrictions in place, ongoing to traditional stores due to pandemic, and the paradigm shift leading to online shopping has helped Amazon, amass big fortunes – says Joanne Feeney – Portfolio Manager, Advisors Capital Management
3. Diversified product range, not restricted only to healthcare products, meaning there always will be a boom even after the pandemic.
4. Growth in global e-commerce, cloud computing has set a stage for Amazon to showcase its superiority in the online world of business – says Mike Bailey, Director of Research, FBB Capital Partners.
5. Amazon’s advertising wing reported $4.22 billion in revenues with a yearly increase of 41%, further illustrating the power of diversity in its products.
Bottom Line: Should You Buy Amazon Stock?
As a quality name with growth prospects, it seems like Amazon could be a buy for long-term investors.
Fox says that investors need to have Amazon in their portfolios over the long term. “You have to hold on to it or you have to buy,” he says.
For investors that don’t have any Amazon exposure, Bailey favors easing into a position gradually but stopping short of taking a full market weighting of the stock. For those investors holding a lot more than the company’s market weight, he suggests considering trimming positions to lock in some gains, especially if other FAANG stocks are a big part of your portfolio. People who don’t own any other FAANGs could take Amazon holdings closer to its market weight.
Hiring Workers To Meet Spiking Demand
In order to fulfill spiking demand, Amazon hired 100,000 additional workers and then added another 75,000 workers. The company also increased the investment it’s making to boost the salary of employees, to more than $500 million, from $350 million.
That additional hiring and coronavirus buying helps to explain how Amazon’s second-quarter revenue bolted 40% to $88.9 billion, beating estimates. That was its best growth in nine quarters.
Few companies have created such a large and lengthy runway of opportunities as Amazon. It paid $13.4 billion to acquire Whole Foods Market in 2017, moving into groceries and food delivery. Amazon also continues to invest heavily in cloud computing, transportation, video content and online video services, competing against Netflix (NFLX) and others. And it leads the market in smart speakers with its line of products called Echo.
Amazon Carves Out New Markets
Among its bold moves into new markets, Amazon is merging into the transportation field. Amazon is a big investor in Rivian, pumping $700 million into the electric truck maker one year ago. Amazon Chief Executive Jeff Bezos said the company had placed an order for 100,000 electric delivery vans from Rivian, a Michigan-based startup. It was also among the investors in a $530 million funding round for self-driving auto startup Aurora Innovation.
Amazon recently expanded its push into self-driving vehicle technology when it announced plans to acquire Zoox, a six-year-old startup for an undisclosed amount. Reports said Amazon paid about $1.2 billion.
Amazon Fundamental Analysis: Double-Digit Growth
Amazon has maintained its double-digit revenue growth for years. To that point, revenue in 2019 climbed 20% from the previous year.
For the second quarter, Amazon reported adjusted earnings of $10.30 per share, zooming past Wall Street estimates of $1.48. Revenue of $88.9 billion beat Wall Street estimates of $81.4 billion. Revenue growth was driven by robust demand and heightened shopping by Prime members.
Earnings powered above estimates even though Amazon spent $4 billion during the quarter on coronavirus-related costs as previously announced. In addition, the company plowed more than $9 billion in capital projects, including fulfillment, transportation and Amazon Web Services.
Amazon Stock Analysis
In the stock market, timing is critical. So when you’re looking for stocks to buy or sell, it’s important to do the fundamental and technical analysis that identifies lower-risk entry points that also offer solid potential rewards.
The IBD Stock Checkup Tool shows that Amazon stock has a best-possible IBD Composite Rating of 99. The rating means Amazon stock currently outperforms 99% of all stocks in terms of the most important fundamental and technical stock-picking criteria.
The stock also has a Relative Strength Rating of 91. The rating tracks market leadership by showing how a stock’s price movement over the last 52 weeks measures up against that of other stocks. It has a healthy EPS Rating of 93, which compares quarterly and annual earnings-per-share growth with all other stocks
After going through every financial statements and previous records financial analyst at SecuredVC believes that Amazon stocks will go up in upcoming quarters.
