This Amazon stock review lets us know they’re part of a handful of companies in the world’s history that have attained a $1 trillion market cap. 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 why the eCommerce industry exists. Sure, Apple (NASDAQ: AAPL) has the iPhone.
Microsoft (NASDAQ: MSFT) has enterprise software, and the Xbox and Alphabet (NASDAQ: GOOGL) have a near monopoly on internet search engines and the Android phone platform.
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Table of Contents
Amazon Stock Review Introduction
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 looking at the 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, not its share price. Yes, Amazon shares are expensive, but you’d have difficulty convincing anyone that they shouldn’t be.
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Amazon Stock History
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 book retailer. This resembles 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 goods 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 are expensive, with low margins and a lot of capital investment into supply chains and warehouse infrastructure. For years, Amazon has been paying into its delivery game. Until one day, we all realized it had become the only real game in town.
Amazon was a verb now, a search engine of its own. It’s a company that has single-handedly introduced overnight and sometimes same-day deliveries. They’ve changed the way we think about deliveries forever.
What Does Amazon Do?
These days? Almost everything. That 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 eliminates the hassle for the consumer of going to multiple 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 Amazon offers its members for USD 119 (in America) per year.
It provides free two-day shipping or sooner on most items and a host of other Amazon products like Prime Video, Prime Music, and Prime Gaming.
As of April 2021, over 200 million Amazon Prime subscribers across 19 different regional marketplaces worldwide. That means Amazon generates $25 billion annually from Prime membership fees alone.
Prime members also participate in events like Amazon’s Prime Day. This is where the site sees much of its product line go on mega sale for the anticipated annual event. On Prime Day in 2020, Amazon sold over USD 10 billion 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 shops online.
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How Much Does Amazon Prime Cost?
Amazon Prime currently offers multiple pricing options. The standard cost for Amazon Prime membership is $14.99 per month or $139 per year. However, Amazon also provides discounted membership options for eligible individuals. For instance, Amazon Prime Student membership is available at a discounted rate of $6.49 per month or $59 per year. Individuals who qualify for government assistance programs such as EBT, Medicaid, or SNAP can also receive a discounted monthly Prime membership. It’s important to note that prices and membership options may vary based on the country or region. Check the official Amazon Prime website for the most accurate and up-to-date information.
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Web Services
A lot of people aren’t going to know much about Amazon Web Services. But this quickly became a huge deal, accounting for over 10% of Amazon’s total revenue last year. In this Amazon stock review, we can see that AWS helps them out quite a bit.
AWS provides on-demand cloud computing platforms and APIs on a pay-by-use basis. Its 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 developing modern age triopoly.
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 and Whole Foods
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 Twitch will ever become as popular or widely used as YouTube, Twitch has a loyal following. As well as a rebranding of Twitch Prime to Prime Gaming 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 of grocery chains worldwide. 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.
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Where Will Amazon Stock Go?
There’s no doubt 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, the new CEO Andy Jassey may change heart and execute a stock split soon, 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. An early indication from Wall Street is that Amazon is ready to report another blowout quarter. Net sales are anticipated to come in at a staggering $100-106 billion, representing a 30-40% year-over-year growth rate, making this Amazon stock review look good.
Earnings are expected to be $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.
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International Sales
As of 2021, the United States reportedly held approximately 68.3% of Amazon’s international revenue share. Amazon’s primary revenue source is its e-commerce business, including online and physical stores. In addition to selling a wide range of products, Amazon also earns revenue from services like its marketplace, where third-party sellers can sell their products on the platform.
Another significant source of revenue for Amazon is Amazon Web Services (AWS), the company’s cloud computing division. AWS provides various cloud services to businesses, including computing power, storage, and databases.
Furthermore, Amazon generates revenue from its subscription services, such as Amazon Prime, which offers benefits like free shipping, streaming services, and exclusive deals to its members.
Advertising is another significant revenue stream for Amazon. The company offers advertising solutions on its platform and off-site through its Amazon Advertising program.
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 be exposed to Amazon as one of their core holdings, Amazon’s stock has trailed the benchmark S&P 500 index over the past six months, exhibiting a downward trend. Amazon doesn’t pay dividends, and those hoping for a stock split under Jassey may have to wait for the new CEO to feel more comfortable in the corner office.
Final Thoughts: Amazon Stock
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.
Frequently Asked Questions
No, Amazon does not currently pay a dividend.
Brace yourselves for this: Amazon's net revenue in 2022 was almost $514 billion. This reflects an increase from $470 billion in 2021. In case you didn't know, most of Amazon's net revenue comes from their online retail product sales.
Disappointing earnings or guidance from Amazon can negatively impact investor sentiment toward the broader technology sector. For example, Amazon is one of the big tech companies whose shares have fueled the rise of the S&P 500. Because of this, Amazon's earnings could affect the overall market. However, it's important to consider multiple perspectives and not draw conclusive judgments based on a single source or article. As you likely know, market reactions to earnings can vary. Thus, it's essential to consider a range of sources and consult with financial professionals to understand the potential impacts of Amazon's earnings on Big tech stocks.
For real-time Amazon (AMZN) stock prices, click here.
Predicting the future stock price of any company, including Amazon, is highly speculative and challenging. However, analysts are generally optimistic about Amazon's business and stock price in 2024. From what I've seen online, many predict full-year adjusted earnings per share of $2.96 in 2024, up from $2.06 in 2023. In addition, AMZN analysts are calling for 11.8% revenue growth in 2024.
