Value Stock #2: Amazon (AMZN)
I view Amazon (AMZN) a bit differently as a value stock. While AMZN stock has struggled in past weeks, it’s still about 40% above its 52-week low and 14% below its 52-week-high. All told, Amazon was up 60% in 2013, so it had a bit of steam to give off anyway.
With AMZN stock, traditional valuation also goes out the window. Amazon is, quite simply, the greatest retailer on the face of the earth with a model nobody can beat. Everything can be purchased at Amazon. If you have Amazon Prime, you get it in two days with free shipping. The number of Amazon Prime customers is in the millions, and the company is going to raise the price for the service — and while surveys are showing that not all customers are happy about the potential change, I think you’ll find things to be much different when push comes to shove.
Amazon is single-handedly going to be the downfall of Best Buy (BBY) and Sears (SHLD) … although the latter is doing itself no favors in execution, and Amazon will be here forever. The company is willing to grow revenues without concern for profitability, and it can do this because it has nearly $9 billion in net cash and can enter virtually any market.
With $18 in cash on hand, AMZN stock is trading at an effective price of $335. But it’s really less the actual price that makes Amazon a long-term value stock, and instead the way it conducts business and the way investors view it.