Amazon Stock (AMZN): Is It a Buy, Hold, or Sell Right Now?

Planning to invest in Amazon Stock? Here’s what you need to know.

Last Updated March 10th 2022
5 Min Read

Amazon stock now offers a favorable balance of risks and potential rewards, according to experts. Amazon (AMZN) stock represents a good buying opportunity following a selloff that has left its shares down 16% year to date.

Key Points

  • The pros of investing in Amazon include its pricing power and a favourable revenue mix that improves profitability.
  • However, AMZN shares include the difficulty of achieving success in new markets and new growth areas. 
  • Investors who are thinking of getting into Amazon stock now should know they are unlikely to see the growth rates the company saw early on.

Amazon.com Inc. (AMZN), one of the largest companies in the world, is a global leader in e-commerce and cloud computing. The company provides an online marketplace offering everything, including electronics, apparel, furniture, food, toys, and much more. It also provides video and music streaming services. 

Amazon's cloud services platform enables organizations to develop, build, and deploy online applications for a broad range of needs. The e-commerce giant undeniably had rough months, but it is working to outperform its peers this year. 

There is an understandable appeal to owning shares of a company you interact with regularly, but what you know about a company as a customer often does not equal knowing it as an investor. So is Amazon Stock a buy, hold, or sell right now? Read on to find out.

Amazon - A leader in Online Retail 

Amazon will have the first-mover advantage in the e-commerce sector.

Amazon’s online retail business has been around for decades. The company's cloud business known as Amazon Web Services (AWS) is not brand new either. But while both these businesses are large and well-established at this point, experts say they are still relatively early in their growth stages. 

Amazon's international business is also poised to keep benefiting from this global shift toward shopping online. In 2019, e-commerce sales accounted for 14.1% of all retail sales worldwide, up from 12.2% in 2018. This figure is expected to reach 22% in 2023. 

Amazon is the largest online retailer in the US and dominates the global market. It has a mighty moat that is highly unlikely to be challenged. Its main competitive advantage is the free and fast delivery of a range of products under the Amazon Prime subscription. This core benefit is only possible because of Amazon's extensive network of highly efficient and massive fulfilment centers. 

Even if a competitor were successful in replicating the physical structures, it would probably take many years for it to achieve Amazon's level of efficiency. For these reasons, Amazon is likely to remain the leader in the e-commerce sector for years to come.

Amazon: The Downside 

Despite its successes, Amazon remains open to competitors and razor-thin profit margins.

 Amazon has grown to become one of the largest companies in the world, both in terms of sales and market capitalization. But, with such great size comes a set of unique risks. The biggest risks of investing in Amazon.com, Inc. stock are increasing competition, profit potential uncertainty, revenue growth uncertainty, speculative valuation, and share price volatility. 

Amazon has delivered high revenue growth since going public in 1997, making investors optimistic about future performance. This growth has also caused investors to overlook the company’s unwillingness to generate sustained net profits.

If these bullish expectations are unmet, Amazon’s stock will likely depreciate because the market has already assumed that future performance will be strong. This speculation further compounds risk by making Amazon’s stock price highly volatile, disproportionately exposing investors to market fluctuations. 

Amazon Growth Revenue 

Understand the growth revenue insights before investing in Amazon 

Amazon has delivered strong growth performance over the past decade, with annualized revenue growth metrics rarely falling below 20% and sometimes approaching 40%. This achievement has stoked bullish investor sentiment and aggressive analyst estimates. 

Nonetheless, growth has decelerated on average over the 2010s. Rapid growth is typically difficult to sustain as the base level rises each year, meaning a larger nominal expansion is required to drive a constant growth rate.

Intensifying price competition in both retail and Web services also impacts sales growth rates. Despite a substantial shift to online sales channels, e-commerce still makes up a small share of the total retail market. This may indicate a natural ceiling to the amount of business that can be done without brick-and-mortar locations, impairing Amazon’s potential upside. The entire bull narrative for Amazon is based on the assumption the company will continue delivering rapid growth. If revenue growth slows too much, the investments that have driven high operating expense levels will prove fruitless. If revenue and earnings do not exhibit sustained high rates of expansion in the future, Amazon’s valuation will prove to be unjustified. Slowing revenue growth is a risk that investors should monitor.

Don't Miss: Amazon Stock Price Predictions

Is Amazon Stock a Buy, Sell or Hold?

Forty-three out of 47 analysts on Yahoo Finance rate AMAZ a buy or strong buy, and Wall Street analysts rate the stock a strong buy. Overall Amazon stock appears to be a good investment.

Analysts who follow technology stocks have high expectations for Amazon, and the e-commerce juggernaut still appears to be unstoppable. But investors who are thinking of getting into Amazon now need to understand that they are unlikely to see the growth rates the company saw early on. If you decide to get in now, it should be to hold the stock for the long term.

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