At just under $805 per share and a price-to-earnings ratio of 184, it’s obvious that Amazon.com, Inc. (NASDAQ:AMZN) is an investor favorite. The firm has been growing exponentially over the last few years as it invests heavily in up-and-coming sectors. Despite showing barely any profits over the past decade, AMZN stock has become a go-to stock for long-term investors.
Amazon stock has already risen more than 7% so far this year, leaving many to wonder whether they’ve already missed the boat. While it would have been better to buy AMZN stock when it was down in the dumps back in February, long-term investors can still benefit from buying Amazon.
Three Reasons AMZN Stock Is Still a Winner
Alexa: Part of the reason for the 6% rise in AMZN shares was news that the company’s personal assistant, Alexa has been incorporated into a wide range of smart products that will be available for sale this year. The news sent Amazon stock higher immediately, but this is probably only the beginning of what Alexa will do for AMZN.
The fact that big names like Volkswagen AG (ADR) (OTCMKTS:VLKAY), Ford Motor Company (NYSE:F), Whirlpool Corporation (NYSE:WHR) and ADT Corp (NYSE:ADT) are all adding Alexa to their latest products proves that they are also betting on Amazon’s success in creating a useful personal assistant. Not only does AMZN have a vote of confidence from the broader market, but the firm is also likely to see more demand for Echo and Dot systems because of the added value users get from having a device compatible with their appliances and vehicles.
The machines are also equipped to enhance an Amazon Prime membership, so getting customers who otherwise wouldn’t have considered Prime to buy the voice-activated devices may help bring more people into the Prime ecosystem.
Amazon Prime Benefits Are Expanding: Speaking of Prime, the $100 per year subscription service is perhaps one of the most enticing reasons to buy AMZN stock. The company makes the majority of its money through it’s e-commerce business and Prime membership has proven to be a great way for the firm to squeeze more dollars out of its current customers and rope in new ones.
Not only does Prime bring in a passive income through subscriber fees, but the fact that users receive free expedited shipping and returns means that members are likely to buy from Amazon, even when it isn’t offering the lowest prices.
AMZN has been working to make it much more difficult to resist becoming a Prime member as well. The firm offers movie and TV streaming may soon be broadcasting live sports — which would make it one of the only streaming services able to include live sporting events in its repertoire. Amazon Prime members can also tap into Amazon’s grocery delivery services and the firm even hosts an annual sale that only its members can participate in.
This year, the number of new Prime subscribers will probably increase substantially as membership benefits improve and Alexa makes her way deeper into the Internet of Things.
E-Commerce Is Just the Beginning: AMZN has proven that investing heavily in rapidly developing markets can pay off — just look at the firm’s dominance in the e-commerce space.
Now, Amazon stock is turning its attention to cloud computing with Amazon Web Services. At the moment AWS generates just under 10% of the firm’s revenue, but that will change as the cloud computing market continues to grow. Not only is AWS already recognized as an industry leader in the cloud computing space, but AMZN is quickly grabbing marketshare away from its peers.
Amazon’s most recent earnings report showed that throughout the first 9 months of fiscal 2016, AWS grew 59% compared to the previous year. That’s an impressive expansion rate and AMZN stock investors can expect to see that figure continue to balloon in the months to come.
Bottom Line on Amazon Stock
Amazon is due to report its earnings at the end of January, and AMZN stock is likely to rise following the announcement as the company appears to be becoming a mogul in both the e-commerce space and the cloud computing industry. This makes now a good time to add Amazon stock to your portfolio.
As of this writing, Laura Hoy did not hold a position in any of the aforementioned securities.
