Amazon’s stock, since the company went public in 1997, has accumulated steady and reliable growth that has led many consider Amazon to be the “gold” of the stock market.
If we had invested $1,000 when Amazon went public (buying no more and no less than 55 shares of the company), our investment would have appreciated at an average annual compound interest rate of 36%, for a total return of 113,000%–counting dividends.
In other words, today those same shares would have a value of $1.396M.
And not only are we talking about a great return, Amazon has one of the qualities most sought after by individual investors or long-term investors: Its growth is reliable, it is constant, almost as if it were a Swiss watch:
And while it is clear that past performance is no guarantee of future returns, both Investor Times analyst team and the general view of the investment community agree: Amazon remains a great asset to invest in in the middle of 2021.
Amazon continues to have growth, profitability and stability prospects that few, if any, other assets can offer.
So, why should you invest in Amazon right now, if you haven’t already?
1.Investing in Amazon is synonymous with investing in “the best businessman in the world”
It’s not lost on anyone that investing in Amazon is synonymous with investing in the world’s richest man, Jeff Bezos (although recently Bezos and Elon Musk, founder of Tesla, are vying for this position).
The entrepreneurial skills of Amazon’s founder and current Executive Chairman are undeniable. Many consider Bezos one of the most astute businessmen in the history of mankind.
Remember that Bezos created Amazon in 1994, and in just over 20 years managed to position Amazon in the leading company it is today; becoming, along the way, one of the richest people in the entire history of mankind.
Also Bezos remains fully involved in Amazon, serving as executive chairman and owning 53M shares of the corporation (10% of the entire company) with a value of $161 billion. Amazon’s founder is, in effect, the main stakeholder in Amazon’s continued exponential growth.
His interests are completely aligned with those of anyone who buys Amazon stock: Keep making money by making Amazon bigger and more profitable.
In short, investing in Amazon is synonymous with investing in one of the most astute and successful businessmen in history, the man who in 20 years went from being an unknown to becoming the world’s richest person.
2. Amazon is much more than an ecommerce platform
Many people think that Amazon is just a big ecommerce marketplace. Great mistake, Amazon goes much further.
For example, Amazon owns one of the most powerful and widely used cloud computing infrastructures in the world: Amazon Web Services (AWS). During 2020 AWS had a market share of 31%. This market share positions AWS as the undisputed leader in the cloud computing industry, ahead of Microsoft (20% market share) and ahead of Google (7% market share).
Platforms such as Netflix run entirely on Amazon’s cloud computing platform (Netflix, in fact, has no infrastructure of its own). Facebook, Zoom and LinkedIn are sustained by AWS infrastructure. Even NASA has contracted cloud computing infrastructure from Amazon to use its vast computational network, which spans the globe, to perform complex computations.
The cloud computing sector is multiplying x2 every 4 years –approximately– and, once again, Amazon dominates this industry worldwide.
A little known fact is that since August 2020 AWS has quantum computing infrastructure available to its customers, being the first corporation in the world to offer these services (and passing ahead of Google and Microsoft, its main competitors in quantum computing).
Quantum computing represents a paradigm shift comparable to the invention of printed circuit boards. It is a technology 100 million times faster than traditional computing, a technology that will change the world as we know it. And, once again, Amazon has managed to take the lead and be the first company to offer quantum computing to governments, security agencies and researchers around the world.
Additionally, Amazon owns many other businesses and subsidiaries, such as TV and movie studios (Amazon Studios), a video on demand platform (Amazon Prime Video) and a long list of emerging startups and other consolidated companies: IMDb, Twitch, Zappos, Ring, Whole Foods Market, Audible, Souq…
3. Ecommerce is a sector with a lot of growth ahead (And Amazon dominates it)
The ecommerce sector is still in its initial growth phase with a market share of approximately 12% (compared to traditional sales). All forecasts suggest that online sales will continue to increase over the next few decades:
Furthermore, Amazon in the US dominates the market with a 45% market share. Amazon’s market share, moreover, increases with each passing year, estimating that in 2021 50% of online sales made in the U.S. will be made through Amazon:
Amazon’s geographic expansion
Amazon’s marketplace currently has a presence in 58 countries located in 5 continents, including China, United Arab Emirates, Turkey, Singapore, Brazil… Since its birth, Amazon has not stopped for a single moment its geographical expansion and it is clear that Bezos has a very clear plan: to turn Amazon into the global ecommerce platform.
Many of the markets he has opened in recent years (United Arab Emirates, Turkey, Australia, India…) are still in a development phase and are expected to flourish and grow in magnitude in the coming years, potentially surpassing the turnover of Amazon US.
We have to emphasize Amazon’s eagerness to incorporate multiple promising companies under its umbrella, as we have already mentioned a few paragraphs above. All indications are that Bezos will continue to bring new acquisitions under Amazon’s parent company, many of them startups with big futures ahead of them.
Amazon is also undertaking a process of horizontal expansion through its Amazon Business marketplace, which currently already sells B2B supplies to large companies, such as hospitals, schools and universities.
4. The global crisis caused by COVID-19 has further strengthened Amazon
The global crisis caused by COVID-19, far from affecting Amazon, has catapulted and further accelerated its growth. Eventually Amazon had to “pause” the sale of certain “non-priority” items in some countries, in order to supply the population with basic necessities, such as food, hygiene products and parapharmacy.
At the height of the pandemic, Bezos’ corporation was forced to hire 100,000 new workers to cope with the increase in sales, as reported in its official blog.
The COVID-19 caused many users who were using Amazon on an ad hoc basis or were not yet customers of the platform to start using it on a recurring basis: Amazon adoption has accelerated.
On the other hand AWS (the subdivision of Amazon that dominates cloud computing worldwide) has also experienced a huge growth in its turnover. Recall that companies such as Netflix or Zoom, which have enjoyed huge demand during the coronavirus crisis and will be indispensable in the post-pandemic world, are supported entirely by Amazon’s cloud computing infrastructure.
There is still no official data on the increase in business Amazon is seeing with its cloud computing subsidiary, but publications such as the New York Times have ventured to say that cloud computing providers are currently “swimming in cash”, referring to the increase in business volume they are experiencing.
All in all, Amazon has benefited enormously from this terrible crisis that is hitting many competing companies. We have no doubt that Bezos’ corporation will emerge even stronger and more dominant from this crisis, nor that its share price will be catapulted by these circumstances.
It’s not that Amazon is weathering the storm deftly… This is simply the perfect storm Amazon has always been waiting for.
5. Full consensus among financial analysts: Amazon’s share price will continue to skyrocket
Among Wall Street’s top financial analysts there is a nearly unanimous consensus when it comes to investing in Amazon. Out of 50 financial analysts surveyed, 48 either recommend buying its stock immediately or estimate that Amazon’s stock growth will outpace that of its competitors. The remaining 2 analysts give it a “hold” rating.
None of the financial analysts surveyed are bearish on Amazon, a situation rarely seen on Wall Street.
The same survey reveals that the most optimistic price consensus among near-term financial analysts stands at $5,200 per share, representing a +64.5% increase in the current share price. The most pessimistic forecast estimates that Amazon’s share price would only increase by +17% in the near term, reaching $3,700.
This data drawn from 50 analyses by some of Wall Street’s most reputable financial analysts makes clear what is evident: The company is destined for success, and investing in Amazon can give us solid and huge potential returns — even in the midst of 2021.
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