Amazon stock (AMZN -3.20%) has been a great long-term performer. It has risen 1,340% over the past 10 years, ending March 31st. This is more than seven times the S&P 500 return of 176%.
Another way to put it, a $1,000 investment in the cloud computing and e-commerce giants ten years ago would now equal $14,400. The $2,760 investment in the wider market is equivalent to $1,600
Investors are naturally curious about the company’s Amazonian size and whether it can continue to grow robustly while also remunerating shareholders. For Amazon stock forecast 2025 visit our site…
It can, I believe. Here are 10 reasons why you should buy Amazon stock.
1. Stock is also a short-term winner
The Motley Fool is focused on long-term investing but the long term can be broken down into many short-term periods. It’s encouraging to see that stocks are a short-term outperformer.
Amazon stock rose 5.5% in 2020 through March 31st, while the S&P 500 (including dividends), is down 19.6% due to investor concerns over the economic fallout of the coronavirus pandemic.
2. Amazon’s ecommerce revenues should be boosted by the pandemic.
Amazon’s first quarter e-commerce revenues are expected to be boosted by the COVID-19 virus crisis. To limit their exposure to the virus, more people worldwide and in the United States are shopping online. Because of the possibility of disruptions in supply chains, people spend more on food and other consumer staples than usual. To reduce their chance of getting infected, some people buy products that they don’t normally purchase, like gloves and masks.
The net effect of the pandemic on Amazon’s ecommerce revenues could be negative in the second quarter or at most this year. Due to economic uncertainty, many consumers may have already started cutting back on discretionary spending. This pare-back may be more than the increase in necessities spending.
3. Amazon should be a long-term beneficiary of the pandemic
Amazon will benefit long-term from the crisis, regardless of how it plays out in the short term. Many people who were not members of Amazon Prime loyalty program prior to the pandemic are now members to receive faster and free delivery during this crisis. Even after the crisis is over, many people will continue to shop online more than they did before it.
4. A founder runs the company.
Research has shown that stock prices of founder-led companies are more likely to be successful than those in the market. It’s therefore a positive that Amazon is headed by Jeff Bezos who founded it in 1994.
As of March 1, his last reported transaction (a stock-gift), he owned 11.2% of the company. As of March 31, the stock was worth $108 billion. This stake should be enough to motivate Bezos in order to manage the company so that it increases its value over time.
5. Amazon Prime membership is on the rise
The number of Prime members is growing at an impressive rate. Amazon announced that there are more than 150 million Prime members around the world in January. The company claimed that it had more 100 million Prime members worldwide in 2018.
Prime members spend more on company’s sites than nonmembers. This is important. According to one study, the average member’s spending is more than twice that of a nonmember.
About Prime: A Standard Membership in the U.S. costs $119 annually or $12.99 per Month. Amazon upgraded Prime’s standard free delivery benefit to one day last year. Due to the recent pandemic, delivery times have been affected. Members have access to a variety of movies, TV shows and music that they can stream for free.
6. Online sales in the United States continue to outperform brick-and-mortar stores
Amazon’s domestic business is benefiting from Americans’ increasing preference to shop online. According to the Census Bureau, e-commerce sales made up 11.4% of all U.S. retail sales in the fourth quarter 2019. The Census Bureau reported that 11% of all retail sales for the full year 2019 were conducted online, an increase from 9.9% in 2018.
E-commerce sales won’t reach 100% of retail sales. However, the 11.4% figure is still a significant growth opportunity.
7. Online shopping continues its popularity worldwide
Amazon’s international business will also continue to benefit from the global shift towards shopping online. E-commerce sales made up 14.1% of all retail sales worldwide in 2019, up from 12.2% for 2018. This number is expected to rise to 22% by 2023.
8. Amazon’s cloud computing services are a profit machine
Amazon Web Services (AWS), is the main source of company profits. AWS was responsible for 67% of total operating profit and just over 11% in total revenue during Q4 2019.
AWS, the market leader within the public cloud space continues to grow rapidly, with Q4 revenues jumping 34% year-over-year. According to Canalys, the market for cloud services infrastructure is expected to grow by 32% in 2020. This should encourage growth.
9. Its ecommerce business will not be dethroned
Amazon is the largest online retailer in America and the world. It is the largest online retailer in the U.S. (and making inroads abroad), and it has such a strong moat that it’s highly unlikely that any rival will be able to thwart it.
Prime offers fast and free delivery on a wide range of products, which is the company’s competitive advantage. Amazon’s vast network of massive fulfillment centers, which are highly efficient, is what makes this core benefit possible. To duplicate this network would be a costly undertaking. Even if a competitor could replicate the physical structures, it would likely take years before it can achieve Amazon’s efficiency.
According to MWPVL International, the company has 170 fulfillment centers across the U.S. and plans for 51 more. There are 188 of these facilities in other countries. These figures don’t include delivery points and other types of facilities.
10. There are many other avenues of growth available: healthcare, advertising and smart home.
There are many reasons to purchase Amazon stock. These include the company’s burgeoning smart-home business, centered on its artificial-intelligence-powered assistant Alexa, and its budding healthcare business, which includes its online pharmacy PillPack.
In addition, the company’s e-commerce business is seeing an increase in advertising revenue and is increasing the number of private label items it sells.
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