Should You Buy Amazon Stock

How Much To Invest In Amazon

One of the most important considerations is how much money you can afford to put into Amazon stock.

The answer isn’t necessarily the same as how much money you have available. That’s because the stock market is considered a long-term investment, and financial experts typically warn against buying any stock with money youll need within the next five years.

Before buying individual stocks, it’s also wise to make sure you have an adequate emergency fund and that you’re saving for any important short-term goals.

With a stock price as high as Amazon’s, you might also be interested in fractional shares, which allow you to purchase a piece of a share based on a set amount of money you want to invest rather than the whole thing. Not all online brokers offer fractional shares, but the offering is becoming more common.

Whether you’re buying Amazon stock or shares in another company, the process is generally the same. Consult our full guide on how to buy stocks to learn more.

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Amazon opened as an online bookseller in 1995, with an initial investment of $250,000 from Bezos parents. It made its primary listing at an initial price of $18 in 1997 on the NASDAQ stock exchange, and since then, they have been listed on seven more exchanges across the world, and their share price has grown more than 150 times. Amazon shares are listed under different symbols in these seven stock exchanges, as shown below.

The Amazon Story Is Far From Over

Amazon is a force to reckon with, and it might stick around longer than anyone can expect. Likely, Amazon will soon overtake Apple, Inc., and Walmart to be the worlds biggest company by the measure of market cap and annual revenues. The company reported a net sales surge of 44% in the first quarter of 2021, from the 2020s $108 billion. The companys expenses fell by 41% within this period contributing to a 69% increase in operating cash flow. Amazon posted an income was more than $8.1 billion, which was more than triple their projections.

However, the company is yet to provide proper guidance for 2021 as the US economy starts recovering from the pandemic. The company, however, predicts an increase in sales by over 30% in the next quarter. See Amazons weekly chart below since 2018.

As an investor looking to pump your money into Amazon stock, you need to start buying the stock because of the following key reasons:

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Amazon Business Model And Share Price History

Amazons e-commerce model is one of the most copied business models in the history of business. After hundreds of dot-coms went bust in the early 2000s, Amazon continued to thrive. The online bookseller expanded into digital entertainment, computing and mobile products. Today, most any retail product can be bought on the site.

Amazon has successfully leveraged its core strengths in digital marketing and virtual business operations into markets outside of retail e-commerce. AWS services, its cloud service that helps businesses move operations online, has 32 percent global market share.

As an online retailer, Amazon benefits from network effects, especially social media effects across its over 2 million sellers and 300 million users worldwide. These amplified effects make brand identity a more powerful marketing tool. So it is no coincidence that Amazon had one of the top brand values in 2019, a measure of the percent a brand contributes to earnings . Online ad and network effects helped sell $50 billion in products in 2019, increasing total revenues 20.5 percent to $280 billion.

Winning the cloud wars Almost 50% of Amazon revenues are coming from outside of the core retail e-commerce business. The more profitable cloud computing and digital advertising businesses both grew sales at 30+ percent in 2019.

Amazon stock performance

Amazon As A Service Platform

Amazon intends to invest more resources in building its service industry segment. Amazon could be undervalued based on the current strong fundamentals in the service industry. Being a market leader, its not questionable that Amazon will be among the primary beneficiaries of the business boom that is expected in the highly profitable service industry in the following years.

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The Numbers Behind Amazons Share Price

Heading into 2021, Amazon was valued at $1.6 trillion, making it the third most valuable company in the S& P 500. Does that mean Amazons run could be nearing its end? While Amazon is extremely valuable , consider that the company has seen its sales grow at 26% annually across the past five years. Thats about 10-fold higher growth than the U.S. economy.

In addition to that, Amazon has become a fantastically profitable company. In 2015, it produced just $596 million in profits, but during the past 12 months racked up $17.4 billion in profits. In fact, Wall Street forecasts Amazons profits will rise all the way up to $66.4 billion by 2024.

Finally, another reason Amazon is frequently considered one of the markets best stocks is its leadership. Amazon CEO Jeff Bezos founded the company and is widely admired for his long-term thinking. While Amazon now has about 800,000 employees, the company is still extremely entrepreneurial despite its massive size.

Bottom Line: Is Amazon Stock Right For You

Amazons share price runs considerably high, so youll want to consider your long-term investment goals before becoming a shareholder. While the company retains blue-chip status, with a history of significant growth, its also important to be mindful of some of its competitors. Companies like Microsoft and Walmart also offer competitively successful stocks. And, similar to Amazon, both companies specialize in either e-commerce, retail or cloud computing.

Though Amazon has recently experienced significant growth in shares, no company is insusceptible to risk. Many factors, such as competition, climate and economy, ultimately affect the performance of a stock. Therefore, potential investors should carefully analyze a company from a holistic standpoint when considering buying. However, Amazon could be a great option for those looking for long-term financial gain. The companys global customer base and diversified product have ultimately brought it much success. If youre interested in stable and potentially promising investments, Amazon could be right for you.

Keep in mind that just because a stock is highly-solicited, it does not mean that it is the best investment for your portfolio. Make sure to consider your financial needs and investment goals, as well as the needs of your portfolio and the level of risk that your are willing to take on.

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Why Is Amazon Stock Going Down

Firstly, there has been a visible shift from growth names to value stocks and Amazon ticks the wrong boxes. Also, from a company-specific perspective, Amazons Q2 2021 earnings disappointed markets. While the company posted better-than-expected profits, its revenue growth was below what analysts were expecting.

It was the first revenue miss from the company in three years. To make matters worse, its Q3 2021 guidance also fell short of estimates. Markets saw the tepid guidance as a sign that the high growth rates of 2020 are over for Amazon.

To be sure, it’s largely accepted that the boom of 2020 for companies like AMZN wasnt sustainable. The company also referred to tougher year-over-year comparisons in the back half of 2021 alluding to the pandemic-driven high growth rates of 2020.

Research On Amazon Stock Price

The share market only favors those who prepare adequately before getting into buying stocks. Amazon has exhibited success in numerous ways, and you may simply want to jump in and get started. There is no such thing as a sure thing when we are talking about the stock market. Keep in mind this is a volatile market, and prices can shift in your favor or against at any time. You want to be sure that Amazon stock is still strong and that it is the right time to buy. As a beginner, you dont want to buy your first stock only to see it lose value and get stuck at a lower price when you get in with all the excitement of how much money you will make. While this is normal in the stock market, you want to buy Amazon stocks at the right price to maximize your profits. It pays to do due diligence and make an informed decision.

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Amazon Web Services Is Thriving

In a letter to shareholders, Jeff Bezos revealed that the Amazon Web Services segment that earned $45 billion in revenue in 2020 could easily generate $50 billion or more soon at the current growth rate. Furthermore, AWS is a profit powerhouse. In 2020, even though the segment made up just 12% of sales, it commanded a whopping 59% of all operating profits.

If you apply the operating profit margin of AWS over the last 12 months to the $50 billion annualized sales, AWS’s operating earnings should easily top $15 billion over the next year. For perspective, that’s more than the operating profit Amazon generated as a whole in 2019 at $14.5 billion.

Still, as with every investment, there are risks involved. For one, the stock is not cheap, selling at a forward price-to-earnings ratio of 70. But that’s below the peak of over 90 it was trading for around September of 2020. Nevertheless, it’s a hefty price to pay. One way to alleviate the risk of paying too much for a stock is to dollar-cost average your desired purchase amount. And even though signs point to consumers sticking with Amazon post-pandemic, there is no telling how they will actually adjust to life on the other side of the crisis.

Long-term investors who are looking for a growth stock that can do well both during and after the pandemic can feel good about starting a position in Amazon.

An Overview Of Amazon

Amazon.com, Inc. was founded in 1994 and is headquartered in Seattle, Washington. The company was founded by Jeff Bezos, whose parents invested $250,000 in the company to help it take off.

Since then, Amazon has grown into one of the worlds largest retailers and has become an e-commerce powerhouse. Jeff Bezos, who is still the CEO of Amazon, is one of the richest people in the world as a result of the companys growth over the past couple decades.

Even though Amazon was originally known for selling books, the company has expanded over the years to include a number of other products and services. Some of the most well-known services and products include:

• Amazon Web Services , which offers cloud computing
• Kindle reader
• Prime Video, which offers streaming content
• Amazon Prime, which offers two-day shipping and other benefits
• Home assistants Echo and Alexa
• Amazon Music, a music streaming service

Amazon also bought Whole Foods Market, which puts the online retail giant into the world of grocery stores. This also allows Amazon to manage grocery delivery, even though it is ostensibly an internet company. Another interesting acquisition by Jeff Bezos in recent years was the purchase of The Washington Post, the well-known newspaper.

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How To Buy Amazon Stock With A Brokerage Account

Amazons stock is technically available to any investor. Many companies offer direct investment options, but those interested in purchasing Amazon shares must utilize a brokerage account. To buy Amazon stock, youll need to use the Amazon ticker on the Nasdaq, which is AMZN.

Your Amazon stock trade will fall into one of two categories: market order or limit order. A market order allows you to purchase the stock at its current cost. A limit order, on the other hand, allows you to set the maximum price youre willing to pay for a share. Then, if a stock exceeds that specified amount, the order wont proceed.

If you cant afford to purchase a full share of AMZN, you can also invest in fractional shares through an online brokerage. These services allow investors to purchase a partial share of equity.

Brokerage firms typically provide a wide range of investment options, including stocks, bonds, mutual funds, exchange-traded funds and more. Fees and investment selections also differ within each brokerage, though many firms now offer commission-free trades on stocks. Youll need to carefully select which firm fits best with your financial goals and needs.

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Amzn: Lost Momentum Vs Dip Buying

Amazons recent earnings report will likely dictate the pace of the stock, at least during the first week or two of August. On one hand, momentum traders will likely want to keep some distance from AMZN, now that e-commerce is expected to decelerate in a post-pandemic environment this is not me saying it, but Amazons own management team during the earnings call.

On the other hand, investors might want to take advantage of the dip to accumulate shares. The Amazon Maven has published its , and the evidence is clear: doing so after pullbacks tends to result in better forward one-year returns. See chart below.

Figure 2: Median one-year return on AMZN.

Expectations For The Third Quarter

Amazon did provide guidance for the third quarter, unlike some other tech companies. The company expects net sales in the third quarter of 2021 to be between $106 billion and $112 billion, reflecting an increase of 10% to 16% from the same period last year. Amazon expects that its operating income in the third quarter will be between $2.5 billion and $6.0 billion. Even the high end of this range would be a decline from the third quarter of 2020, which saw operating income of $6.2 billion.

The company indicated that the third quarter of 2020 was outstanding, due to the increase in online shopping resulting from the pandemic. This means that the comparison of this years third quarter to last years will be challenging. Thus, the company expects lower operating income in the third quarter of 2021 than it saw in the same quarter last year.

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Amazon Stock Dividend Information

Instead of paying dividends, high growth companies return value to shareholders in the form of increases in stock value and invest in acquisitions to sustain growth. Since its IPO in May 1997, Amazons stock value has increased more than 130,000 percent. In comparison, Apple stock has increased about 36,000 percent over the same period . Investors expect Amazon to create shareholder value from its recent $13.7 billion acquisition of Whole Foods.

India’s Future Retail Must Take Part In Amazon Dispute Arbitration Singapore Panel Says

NEW DELHI -Future Retail must take part in arbitration over a commercial dispute with Amazon.com Inc, a Singapore arbitration panel ruled on Wednesday, rejecting the Indian retailer’s bid to avoid the process. Amazon is trying to block https://www.reuters.com/article/amazon-india-future-reliance-idUSKBN2871AM Future’s $3.4 billion sale of its retail assets to Indian market leader Reliance Industries, accusing it of breaking contracts. Future denies any wrongdoing.

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Is Buying Amazon Stock The Right Move For You

Anytime youre evaluating a stock, you need to decide whether its the right investment decision for you and your personal finance goals. One of the hazards of investing in individual stocks is that you could end up losing out if that company declares bankruptcy or goes out of business due to market volatility. Although its hard to imagine such a fate for Amazon, its still a possibility.

Another thing to take into account is that because Amazon had such an amazing run-up in stock price, getting in now isnt likely to provide you similarly dramatic returns. Many people who have made a lot of money picking individual stocks did so because they bought shares early on and benefited from the big gain in value. The time is past where you can buy Amazon for less than a few dollars per share and reap the big gains. However, you might still be able to meet your portfolio growth goals even when you buy fractional shares of Amazon.

If your goal is income investing, Amazon probably wont work for you. Amazon has never paid a cash dividend . It doesnt appear that Amazon is likely to adopt a dividend in the near future, though the company could decide to at some point. For the most part, Amazon stock is likely to work best for those who are looking for growth in their portfolios and believe Amazon still has room to increase in stock price.

Just remember that with investing, theres always the risk of loss, no matter what you choose to invest in.