I have already made a decision to start cost averaging into some Amazon stocks. Since I did the research for this I thought I might as well post the information I found, and who knows, it might be useful for you as you do your own research and due diligence if you are thinking of buying into Amazon in 2020.
Amazon strong during the corona virus crisis
Positioning itself as the go-to online retailer for the world during the Covid-19 pandemic, Amazon’s losses were very small compared to other large cap stocks in the global markets. As the world were told to stay at home, more and more people flocked to online sales and online cloud technology to stay connected. Amazon of course, have oodles of both.
Ecommerce in the US continues to grow. In 2019 it accounted for over 11% of all retail compared to 9.9% the year before. This can only really keep rising and Amazon is obviously well positioned to capitalise on this. A recent announcement that it is hiring 100,000 more workers for it’s fulfillment centres is indication of how busy their sales branch continues to be.
Stay at home benefits
Amazon is also seeing subscribers to it’s Prime video service rise and recently dipped their toe in aquiring Premier League football rights. As people stay at home and seek entertainment, it’s streaming and music offerings are likely to provide another strong source of income.
Technology for a world WFH
WFH – working from home – means more and more companies are using cloud technology to keep their businesses and workforce connect. With AWS (Amazon Web Services) Amazon are right at the thick end in providing these services to eager companies ready to avail of cloud infrastructure. I would imagine that a post Covid-19 world will be much more interested in moving to more robust technology and I would see AWS as a huge income generator for Amazon in the year to come.
But it’s expensive!
It certainly is. Amazon do not pay any kind of dividend and I would say it is unlikely that they will any time soon. And by that I mean a dividend payment is years and years away, if ever, so you are relying on growth alone for your investment. Amazon continues to reinvest all it’s profits – Jeff Bezos recently saying “Under normal circumstances, in this coming Q2, we’d expect to make some $4 billion or more in operating profit. But these aren’t normal circumstances. Instead, we expect to spend the entirety of that $4 billion, and perhaps a bit more, on COVID-related expenses.”
Spending $4 billion is a big, big move and shows the intensity and ambition of this company. Further, Amazon has so many ways to make money, that it’s hard to see it slowing down.
AWS is massive going forward, and while margins on consumers good is so small, it remains the third biggest retailer in the world with huge reach. Prime and all that it brings, will offer an income from the home streaming market and a recent acquisition of Pill Pack sees Amazon move into the pharmaceutical sector.
In light of all the things I found when I looked into Amazon I am happy to continue to buy a little piece of the company on a regular basis going forward. I think there is a still a large amount of growth to be seen for this company and I would like to invest in that.
Please remember, none of this is financial advice and please do your own research when looking at buying any financial product.