E-commerce juggernaut Amazon.com, Inc. (NASDAQ:AMZN) has seen its share price surge 30% so far this year. The company has been on fire with exciting new products and a fiercely competitive cloud computing arm. However, the recent run-up is only the beginning for AMZN and long-term investors looking for something to buy and hold on to should consider adding Amazon stock to their portfolios.
One of the reasons I see AMZN stock continuing to climb is the firm’s virtual assistant Alexa.
The personal assistant/speaker may have seemed like a gimmick upon its release, but Amazon’s Alexa and Dot systems have been immensely popular among consumers and their expanding capabilities bode well for the firm’s staying power.
Alexa’s ability to control connected appliances, make Amazon purchases and play music, have made the speaker a big part of people’s life. AMZN was clearly hoping to put itself at the center of customers’ homes with the device and that tactic is working. Alexa has become somewhat of a command center that makes running a household easier all while further tying consumers in to the Amazon ecosystem.
AMZN: Smartphone Prospects
Now, Amazon is planning to come out with a new smartphone that will connect to Alexa and allow the virtual assistant to make and answer calls through the home-speaker system. This would be a big deal for AMZN, because the firm’s previous attempt to break into the smartphone market was a flop.
However, using the already popular Alexa to get consumers interested in the new phones could be a good way to boost sales. Not only that, but if the Amazon smartphone is able to gain traction, the firm will have further expanded its ecosystem, making it much more difficult for people to easily switch to a different brand.
Just the Beginning for Amazon Stock
While AMZN may seem to be reaching its peak, one of the biggest reasons to buy Amazon stock now is that the company is still in the growth phase. Amazon CEO Jeff Bezos has been investing heavily in the firm’s future growth and the company has been developing an array of services that are likely to grow exponentially alongside the Amazon’s already profitable e-commerce segment.
One such bet has been Amazon Web Services (AWS), AMZN’s cloud computing arm. Cloud computing is a fast-growing industry and Amazon has already established itself as a major player. Right now, income from AWS only makes up a fraction of Amazon’s bottom line, but as the business grows investors can expect to see a much more dramatic impact on Amazon’s revenue.
E-Commerce Will Grow as Well
Online shopping has seen a surge in popularity over the last five years, but that’s nothing compared to what’s to come. At the end of 2016, online purchases made up just 8.3% of the retail sales in America.
Across the world, e-commerce represented 8.7% of total sales. That means there is a huge opportunity for online growth in the retail space and AMZN has already begun to look for new ways to get people shopping online. From rolling out its own clothing lines to creating click-and-collect grocery stores, Amazon is constantly trying to make shopping faster and easier for consumers.
Those efforts will pay off as the shift toward e-commerce continues. Amazon already has the brand recognition and consumer trust it needs to try out new ideas, and its Prime service has given people a reason to use AMZN even when the firm isn’t offering the lowest prices.
The Bottom Line on AMZN Stock
AMZN stock is a great buy-and-hold investment. The company has proven that it can innovate and keep up with the fast-changing retail environment while still testing the waters in other industries. Investors who want a stock that will deliver gains for years to come should add Amazon to their portfolio because the firm is unlikely to slow down anytime soon.
As of this writing, Laura Hoy did not hold a position in any of the aforementioned securities.
