Amazon Stock Review

Amazon Stock Review

8 min read

Chart by TradingView.

This Amazon stock review let’s us know they’re apart of a handful of companies in the world’s history that have attained a $1 trillion market cap. In fact, they’ve single-handedly created a world where we can get almost anything we want delivered to our door by the next day.

Amazon (NASDAQ: AMZN) is the eCommerce leader and in many ways, is the reason why the eCommerce industry exists at all. Sure, Apple (NASDAQ: AAPL) has the iPhone.

Microsoft (NASDAQ: MSFT) has enterprise software and the Xbox, and Alphabet (NASDAQ: GOOGL) has a near monopoly on internet search engines; as well as the Android phone platform.

But there’s something undeniable about Amazon. It’s almost as if despite the growth and global logistics domination, Amazon isn’t even close to being a mature company yet. So is Amazon stock a good investment right now? Shares are expensive, but only when you look at the actual stock price.

It’s trading at a very reasonable price to sales ratio of 4, compared to 24.5 for Tesla (NASDAQ: TSLA) and 45.98 for Shopify (NYSE: SHOP). Amazon has a price to earnings ratio of 79.87, which is high, but not when you consider it against the same two companies with Tesla’s 1,140 and Shopify’s 424.34.

It’s a good lesson in valuing a company by its ratios and not by its share price. Yes, Amazon shares are expensive, but you’d have a hard time convincing anyone that they shouldn’t be. 

How Did Amazon Get to Where It Is?

We all know the story of this Amazon stock review by now. Former CEO Jeff Bezos founded Amazon in his garage in Bellevue, Washington as an online retailer for books. In a similar way to Netflix’s (NASDAQ: NFLX) humble beginnings as a DVD rental service. The marketplace began to add in things like technology, toys, clothing, and other consumer good staples. As a result, the website quickly became synonymous with the rising eCommerce landscape in the United States.

In just twenty years after Bezos thought of the idea in his garage, Amazon surpassed Walmart (NYSE: WMT) as the most valuable retailer in America. But the argument against Amazon was that it wasn’t profitable. Until it was.

Shipping and logistics is an expensive game to play with low margins and a lot of capital investment into supply chains and warehouse infrastructure. For years Amazon was paying into its delivery game. Until one day, we all realized that it had become the only real game in town.

Amazon was a verb now; a search engine onto its own. It’s a company that has single-handedly introduced overnight and sometimes same day deliveries. In fact, they’ve changed the way we think about deliveries forever. 

What Does Amazon Do?

These days? Almost everything. That’s what happens when you build the world’s largest ecosystem and logistics model. Everyone becomes reliant on you and any other products or services you sell.

This only eliminates the hassle for the consumer of going to multiple different sites. Just get it all on Amazon! Which is great for an Amazon stock review. So what’s some of what they do?

Amazon Prime: Can we say this is what put Amazon on the map? Amazon Prime is the premium service that Amazon offers to its members for $119 USD (in America) per year.

It provides free 2 day shipping or sooner on most items as well as a host of other Amazon products like Prime Video, Prime Music, and Prime Gaming.

As of April 2021, there are over 200 million Amazon Prime subscribers around the world across 19 different regional marketplaces. That means Amazon generates $25 billion every year from Prime membership fees alone. 

Prime members also get to take part in events like Amazon’s Prime Day. This is where the site sees much of its product line go on mega sale for the much anticipated annual event. On Prime Day in 2020, Amazon sold over $10 billion USD worth of goods. Which is more than a lot of companies do in a year. Like a Netflix subscription, an Amazon Prime membership is a must have for any household that does its shopping online. 

Amazon Web Services

A lot of people aren’t going to know much about Amazon Web Services. But this is quickly becoming a huge deal as it accounted for over 10% of Amazon’s total revenue last year. This Amazon stock review can see that AWS helps them out quite a bit.

AWS provides on-demand cloud computing platforms as well as APIs on a pay by use basis. It’s biggest rivals are Microsoft’s Azure cloud and Alphabet’s Google Cloud product. But the three big tech companies have found a sort of equilibrium where all three can co-exist in this modern age triopoly that is developing. 

How important is AWS to Amazon moving forward? When Jeff Bezos stepped down as CEO in February of this year, his replacement was already chosen as Andy Jassey, head of Amazon Web Services. As cloud computing becomes increasingly important to this generation, Amazon should see a steady increase in revenues from AWS. Which will make an Amazon stock review look good.

Twitch: Twitch is a popular streaming and video platform that targets the younger populations for live streams and videos that can be downloaded and watched after the fact. It rose to prominence as a way for professional gamers to have a live audience. It’s now used for everything from sports betting to investing and live market analysis. While it’s hard to think that Twitch will ever become as popular or widely used as YouTube, Twitch does have a loyal following. As well as a rebranding of Twitch Prime to Prime Gaming, in order to bring the brand into the Prime world.

Whole Foods: The forgotten acquisition! When Amazon purchased Whole Foods for over $13 billion, many thought it was the end to grocery chains around the world. But not much has come of this. Aside from occasionally being able to purchase an Amazon Kindle at a Whole Foods store. The deal did provide Amazon with over 400 brick and mortar stores around the United States and Canada, and has spurned the creation of Amazon grocery stores with touchless payment and cashier-less stores.

Where Will Amazon Go From Here?

There’s no doubt in anyone’s mind that Amazon will be a $2 trillion market cap company at some point during the next couple of years. The Amazon stock review of price shows it continues to rise.

And even though there’s increased chatter that the new CEO Andy Jassey may have a change of heart and execute a stock split in the near future. Which would be music to investors’ ears.

Still, it’s hard to imagine the stock being able to be a ten-bagger from here. Even though it may not be at the rapid growth stage of other companies anymore, Amazon will still have problems multiplying in value from here. 

Amazon is set to report its quarterly earnings on April 29th, 2021. Early indication from Wall Street is that Amazon is ready to report another blow out quarter. It’s anticipated that net sales will come in at a staggering $100-106 billion. Which represents a 30-40% year over year growth rate. Which will make this Amazon stock review look good.

Earnings are expected to be in the neighborhood of $9.98 per share; which would signify a 99.2% growth rate year over year. Amazon experienced some lucrative tailwinds from the COVID-19 pandemic. Its eCommerce business surged during 2020. In a world where many people ask why they need to leave their homes when Amazon can deliver it to them, it’s easy to see why Amazon’s eCommerce model is still the backbone of Amazon’s core business moving forward. 

Is It Too Late to Buy Amazon Stock?

We’ll never give you direct investing advice by saying buy or sell this stock, but we’ve provided you with some due diligence and research on why Amazon continues to be a great investment. Even while its shares trade at over $3,300 per share. It’s up to you if you want to buy shares of Amazon, or take that $3,300 and put it into a broad sector index fund.

Because most of them will have exposure to Amazon as one of their core holdings. Amazon’s stock has trailed the benchmark S&P 500 index over the past six months, which exhibits a downward trend. Amazon doesn’t pay a dividend and those who are holding out hope for a stock split under Jassey, may have to wait for the new CEO to feel a bit more comfortable in the corner office.

Bottom Line

As far as great companies go, Amazon is perhaps the greatest. It’s hard to argue against the investing philosophy of ‘investing in great companies’. With Amazon smashing its earnings call once again, investors who’ve been waiting to start a position in Amazon may not see these lower stock prices again for quite some time. 

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