3 Reasons Amazon.com, Inc. (AMZN) Stock Is STILL the King

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AMZN - 3 Reasons Amazon.com, Inc. (AMZN) Stock Is STILL the King

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Last week, e-commerce giant Amazon.com, Inc. (NASDAQ:AMZN) released disappointing holiday sales figures that caused investors to question the firm and send AMZN stock down roughly 3%. While the company produced fourth-quarter earnings that surpassed expectations, the firm’s revenue and future guidance figures came in below estimates.

3 Reasons Amazon.com, Inc. (AMZN) Stock Is STILL the King

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Amazon’s lackluster earnings results may have shocked the broader market, but investors would be wise to use AMZN stock’s loss as a buying opportunity because shares of the company very rarely go on sale.

Amazon has a lot of potential and its willingness to invest in the future makes it a great long-term bet. While AMZN stock is still expensive at just over $810 per share and a price-to-earnings ratio of 186, the firm’s share price could make its way above $900 by the end of the year.

AMZN Stock: Three Reasons to Keep the Miss in Perspective

It’s never a good thing when a company misses revenue expectations and issues worse-than-expected forward guidance. However, it’s important to take a look at why AMZN’s fourth-quarter earnings shook out the way they did and whether it’s a deal breaker for investors considering picking up Amazon stock.

Some of the reason for the revenue miss can be explained by currency fluctuations, which hurt the retailer’s revenue figures by around $558 million. Amazon is also adjusting to its fast-growing marketplace and the number of merchants that have joined the firm’s “fulfilled by Amazon” program.

This has in-turn increased shipping costs, but the long-term benefits of the growing number of “fulfilled by Amazon” merchants outweigh the short-term negatives. It allows Amazon to offer its Prime members a greater selection of items and will likely help AMZN grab an even larger marketshare.

Speaking of Amazon Prime, the loyalty program is another good reason for investors to get behind Amazon stock. Not only do Prime’s subscription fees provide AMZN with a passive revenue stream, but the program helps bind people to its ecosystem.

Prime has expanded to include benefits like dash-buttons, which allow people to reorder certain products at the click of a button, and movie and music streaming. Prime members who use all of Amazon’s services are not only more likely to buy additional Amazon products like the firm’s virtual assistant Alexa, but they will also shop at its website before considering rivals — even if it doesn’t offer the lowest prices.

AMZN is doing with retail what Apple Inc. (NASDAQ:AAPL) did with technology: building a brand that people will continue to buy into because it is convenient and connected.

However, while the company’s dominance in retail is a big reason to buy AMZN stock, one of the most compelling elements of the firm’s business is Amazon Web Services — the firm’s cloud computing arm. The cloud computing space represents a huge area for growth as the industry is relatively new, but AWS has already become one of the largest players.

AWS has been slowly making up a larger and larger percentage of Amazon’s total sales, and the fourth quarter was no exception. The firm’s cloud computing arm has been growing rapidly over the last year and as the industry continues to expand, investors can expect AWS to add to Amazon’s bottom line in a larger and larger capacity.

Bottom Line on Amazon Stock

AMZN stock’s stumble last week has given investors an opening to add shares to their portfolios. While there was some weakness in the company’s fourth-quarter results, the firm is on track to continue growing and Amazon stock will likely deliver outstanding gains in the year ahead.

As of this writing, Laura Hoy was long AAPL and AMZN.

Marie Brodbeck has a Finance degree from Duquesne University and has been a financial journalist for more than a decade. Her work can be seen in a variety of publications including InvestorPlace, Benzinga, Yahoo Finance and CCN.


Article printed from InvestorPlace Media, https://investorplace.com/2017/02/3-reasons-amazon-com-inc-amzn-stock-is-still-the-king/.

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