ARTICLE UPDATED AS OF 09/14/2022: The latest market correction has affected the entire stock market, including Amazon shares. We are facing a great opportunity for investors wishing to invest in the undisputed leader in e-commerce. Indeed, Amazon’s current share price has fallen back to the price of 2 years ago, generating an interesting entry point for long-term investors.
Article summary
- 1. Investing in Amazon is synonymous with investing in “the best businessman in the world”
- 2. Amazon is much more than an ecommerce platform
- 3. Ecommerce is a sector with a lot of growth ahead (And Amazon dominates it)
- 4. Amazon had a little crash (A great investment opportunity?)
- 5. Full consensus among financial analysts: this is Amazon’s future
- How to invest in Amazon without paying commissions?
- Amazon’s financial situation and forecasts for the company’s future
- Find the best broker to invest in Amazon
- Frequently asked questions before investing in Amazon
Amazon’s stock, since the company’s IPO in 1997, has accumulated steady and reliable growth that has led many to regard Amazon as the “gold” of the stock market.
If we had invested $10,000 in Amazon when it went public (buying no less than 55 shares of Amazon stock), our investment would have appreciated by 54,498.9%.
In other words, today those same shares would be worth €5.44 million.
And we are not only 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 past performance is clearly no guarantee of future returns, the general view of the investment and financial analyst community agrees: Amazon stock remains a great asset to invest in today
Amazon continues to have growth, profitability and stability prospects that few – if any – other Nasdaq or S&P 500 assets can offer.
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 is 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, have been disputing this position).
The entrepreneurial skills of Amazon’s founder and current CEO are undeniable. Many consider Bezos to be one of the most astute businessmen in the history of mankind.
Recall 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.
Bezos is still fully involved in the corporation, serving as executive chairman and owning some 1 billion shares (10% of the entire company) with a net worth of about $130 billion. Amazon’s founder is indeed the main stakeholder in Amazon’s stock continuing its exponential growth.
His interests are completely aligned with those of anyone who invests in Amazon: 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 richest person in the world.
2. Amazon is much more than an ecommerce platform
Many people think that Amazon is just a big ecommerce marketplace, a simple online ecommerce portal whose business model is the sale of products and intermediation. Big 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%, a figure that has increased to 33% in Q2 2022.
This market share positions AWS as the undisputed leader in the cloud computing sector, ahead of Microsoft (21% market share) and ahead of Google (10% market share).
Platforms such as Netflix run entirely on Amazon’s cloud infrastructure. Facebook, Zoom and LinkedIn are supported 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 multiplies 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 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.
In addition, Amazon owns many other businesses and subsidiaries, such as TV and film 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 indicate that online sales will continue to increase over the next decades:
As can be seen in the graph, the online e-commerce sector (dominated by Amazon) is expected to continue to grow over the next few years, with an even higher growth rate than in past years. It is estimated that by 2025 it will have reached a total volume of 1,329.7 billion US dollars (1.3 trillion), which represents an increase of more than 100% in a period of only 5 years.
In addition, Amazon dominates the US market with a 50% market share. In other words, half of the turnover volume shown in the above graph would go entirely to Amazon if it only maintains its current dominance. Amazon’s market share, moreover, increases with each passing year, estimated at an annual increase of 3.2%:
Amazon’s geographic expansion
Amazon’s marketplace currently has a presence in 58 countries on 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 it 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, and may even surpass the turnover of Amazon USA.
To all of the above we have to add Amazon’s eagerness to incorporate multiple promising companies under its umbrella, as we have already mentioned a few paragraphs above. Everything points to the fact that Bezos will continue to bring new acquisitions under Amazon’s parent company, many of them emerging companies with great futures ahead of them.
Amazon is also pursuing 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. Amazon had a little crash (A great investment opportunity?)
The pandemic benefited Amazon enormously. Having limitations on going to physical stores and being forced to stay at home for days on end encouraged the adoption of online shopping and, specifically, Amazon. Many users who had never used the e-commerce platform began to do so.
The shares of Jeff Bezos’ company reflected these new consumer habits and appreciated by more than 100% during the pandemic. It should be noted that the confinement also caused many people outside the investment world, locked in their homes, to decide to invest in Amazon when they saw the increase in popularity of Jeff Bezos’ company.
After the pandemic, many of us decided to travel again, to buy more in physical stores, to spend more on leisure and travel? Penalizing – or returning to normality – certain business models such as Amazon’s.
This change in consumer habits, together with a major correction suffered by the American indices (and, by contagion, almost all the world’s stock exchanges) and other circumstantial reasons that we will discuss later, have caused Amazon’s shares to fall back to a much fairer price.
From its all-time high, Amazon’s shares fell almost -46%, to touch the lower range of the bullish channel. From there they rebounded and resumed the upward path, to currently trade at -31% of their historical high. In the previous period, Amazon, along with other Nasdaq and SP&500 companies, was considered to be in a “bubble”, with shares trading at inflated prices and above their valuations.
These types of market corrections create unique investment opportunities. The best time to buy shares of Amazon or other large companies with potential is in these types of one-off corrections that occur every few years.
5. Full consensus among financial analysts: Amazon’s stock price will continue to rise steeply
Among Wall Street’s leading financial analysts, there is a full consensus when it comes to investing in Amazon unanimous consensus when it comes to investing in Amazon. Out of 39 financial analysts surveyed, 38 recommend immediate purchase of its shares or else estimate that the company’s stock growth will outpace that of its competitors. Only one analyst gives it a “hold” rating.
No financial analyst surveyed is pessimistic about 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 $270 per share, which represents a +114% increase in the current stock price
. The median forecast of all Wall Street analysts places Amazon’s stock price at $176.94 (a +40.31% increase from the current share price).
This data obtained from 39 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 huge potential returns in the coming years.
How can you invest in Amazon right now and without paying commissions?
If you want to invest in Amazon, the favorite option recommended by INVESTOR TIMES is the broker eToro.com, an investment platform used by more than 20 million users, based in London and authorized by CySEC and the FCA (the UK regulator), among others.
When it comes to investing in Amazon, eToro offers us a great advantage: No commissions of any kind (0%) on the purchase, sale or custody of shares. Another important point in favor of eToro is that it allows you to add funds to your account immediately by credit card, Paypal or bank transfer.
In addition, eToro.com allows you to invest in Amazon by buying fractions of shares, so that even investors with little capital can invest in large companies whose shares have a high price.
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Amazon’s financial position and forecasts for the company’s future
Gross revenue
Amazon’s gross revenue (revenue) has been on the rise for the past 5 years, reaching $469.82 billion in 2021 (a year-on-year increase of +21.7%). It might seem that an annual revenue increase of 20% is a one-off figure; however, Amazon has been maintaining these growth figures for years now.
2022, the year in effect, is estimated to be a bit weaker than expected in terms of gross revenue for Amazon. The post-pandemic reopening has somewhat penalized Amazon’s stock, as mentioned above.
Still, financial analysts estimate that Amazon’s revenue will continue to grow markedly in the coming years –as you can see in the chart above–to reach $889.75 billion (yes, almost $1 trillion) by 2026.
EBIT (net profit before taxes)
Earnings before interest and taxes (EBIT) is obtained by subtracting from the gross income we have just seen all the expenses that Amazon has to carry out its activity.
Amazon’s net profits have also been on a remarkable upward trend for years (in 2021, for example, they increased by 57.79% over the previous year). However, this current year, a notable anomaly is occurring.
In 2022 Amazon is making a loss, or so show the Q1 and Q2 earnings reports during which it has lost about $2 billion, as reported by the Wall Street Journal. What’s the reason?
- As we have already mentioned, the social reopening we have experienced in recent months has brought with it certain changes in consumer habits: we prioritize spending on experiences, leisure, travel, restaurants….
- Like any other company, Amazon has suffered from increases in raw material costs, energy and fuel prices, shortages of workers (a very notable problem in the USA) and blockages in supply chains.
- Amazon invested in the electric car company Rivian, with the aim of electrifying part of its fleet of delivery vehicles. Rivian’s shares have fallen sharply, which has had an impact on Amazon’s balance sheets.
Analysts agree that the fall suffered by Amazon in the first two quarters of the year is temporary and circumstantial, and that it will recover its profits in a matter of months. Moreover, it is estimated, as shown in the graph above, that by 2024 Amazon will reach $50 billion in profits, a figure that will double by 2026, surpassing $100 billion in profits.
It is worth mentioning that the stock market discounts events in the present that are expected to occur in the future. In other words, this one-off fall suffered by Amazon in the first two quarters of the year is already discounted from the share price, even though the year is not yet over and we do not have Amazon’s annual report of financial statements.
If Amazon returns to its previous profit margins, as analysts predict will happen soon, expect Amazon’s share price to return to the upside and head towards its previous all-time highs.
Amazon’s balance sheet summary
Amazon’s revenue and profit forecasts are promising for the coming years. In addition, Jeff Bezos’ company has a large amount of cash ($96 billion at the end of last year) and assets in general ($420 billion), figures that have increased in recent years and that will allow Amazon to invest in innovation, in new business acquisitions and, ultimately, in its own growth.
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Frequently asked questions before investing in Amazon
Is it possible to invest in Amazon without buying stocks?
No, the only way to invest in Amazon is by buying stocks (or other more complex derivative financial products such as options or CFDs). For the average or novice investor whose objective is medium to long term, the best investment vehicle is stocks. For the trader, whose objective is to speculate, the derivative products mentioned above may be more suitable.
Do I need a broker to buy Amazon shares?
Yes, to buy shares you always need an intermediary (an online broker or a bank, usually) that transmits our stock purchase order to the stock exchange and takes care of the custody once purchased.
How do you make money with Amazon shares?
When we buy shares of a promising company with growth potential, such as Amazon, we can expect the company’s stock to appreciate over time. Shares are purchased at the current market price in the hope of selling them at a future date at a higher price. When you reach the point where you wish to sell your Amazon shares, you simply log into your broker’s account, give the sell order and the cash will be credited to you. Depending on the broker, you can withdraw it instantly or within a few days.
How to buy Amazon shares?
As soon as you have created an account with one of the brokers we recommend (we only recommend safe brokers and strictly regulated by European bodies) you will have to verify your account. With this done:
- Deposit funds into your broker account. Depending on the platform you can do it by bank transfer (takes a few days) or by credit card or Paypal (instant deposit).
- Search for Amazon shares. To do so, enter in the broker’s search bar the ticker “AMZN” (this is the code that identifies Amazon shares). Click on the main result.
- Buy the shares. On your broker’s Amazon-specific page, you will see a “Buy” or “Invest” button, depending on the broker you use. Make sure you are buying real stocks and not other derivative products. Enter the total amount you want to invest, the type of order (limit or market*) and additional parameters such as stop loss or take profit. Execute the order.
*In a market order your stock purchase will be executed at the current market price. In a limit order you must specify the price at which you want to buy the shares. If the price you enter is lower than the current market price, the order will not be executed, as you are offering for the shares at a price lower than their current market price.
What is the current price of Amazon stock?
The current Amazon stock price is $96.32(Note: this price is updated in real time).
Is it profitable to invest in Amazon and how much money can you make?
It is impossible to predict how much money you can make by investing in Amazon. Stocks fluctuate in price due to the stock market’s own laws of supply and demand; they are not an asset that increases in value in a linear and predictable fashion. However, the average estimate of 39 Wall Street analysts is that Amazon shares will increase in value by +40.31% in the next 12 months.
Is it safe to invest in Amazon?
As we have mentioned, investing in shares of any company does not offer us any guarantee of returns. Risk and return always go hand in hand: the higher the return an investment can offer us, the higher the risk we assume.
However, Amazon has demonstrated an exceptional capacity to generate and increase profits, to gain market share over its competitors, with a tireless desire to expand and innovate… We can consider Amazon stock as one of the safest assets in its category.
Can I lose money by investing in Amazon? Is it risky?
Of course, just because Amazon’s stock has been in a clear uptrend for more than a decade does not mean that it cannot fall in smaller time frames or that its uptrend may slow down or even reverse. When investing in stocks, it is important to properly manage risk, as the stock market can behave in unexpected ways.
Why did Amazon’s stock go from being worth thousands of dollars to just over a hundred dollars?
In June 2022 Amazon carried out a mechanism known as a stock split. Its shares had risen so much in price that each one of them cost thousands of dollars, something that is considered counterproductive. To solve this, they decided to split each of their shares into 20 parts (a 20:1 stock split ), so that each person who owned one of the old shares now owned 20 of the new ones.
How much should I invest in Amazon?
The amount you should invest depends on your personal circumstances and risk appetite. Consider investing only a fraction of your entire capital in stocks, a portion that you do not need in the short term. It is recommended that you diversify your investments and do not put your money in shares of a single company: in addition to Amazon, there are more companies with great profit potential: Tesla, Apple, Microsoft…
Are there any scams when investing in Amazon?
Yes, unfortunately, there are investors who have been scammed by pretending to invest in Amazon through fraudulent platforms that have taken their money. To avoid falling into scams, it is of utmost importance to invest through brokers or investment platforms regulated by the National Securities Market Commission (CNMV) or other international bodies.
Should I buy shares with my bank or with an online broker?
Many traditional banks offer investment services in the stock market. However, traditional banks always charge much higher commissions than online brokers, have less usable and intuitive platforms and much less flexible operations.
Is it possible to invest in Amazon through a mutual fund?
Yes, there are many mutual funds and ETFs that include Amazon shares in their composition. However, you should consider that both mutual funds and ETFs are highly diversified “baskets” of securities, which in addition to Amazon shares include hundreds of other companies. For example, the QQQ ETF, which replicates the Nasdaq index, includes the 100 largest U.S. technology companies, among which, of course, is Amazon. The same goes for the SPY exchange-traded fund, which includes the 500 largest US companies and replicates the S&P 500 index. If you want to know more about exchange-traded funds, this article is at your disposal
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