3 Megatrends That Will Power Amazon.com, Inc. (AMZN) Stock for Years

Amazon stock - 3 Megatrends That Will Power Amazon.com, Inc. (AMZN) Stock for Years

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Until this week, shares of Amazon.com, Inc. (NASDAQ:AMZN) haven’t been able to buck the recent bearish move. During the past couple weeks, AMZN stock is off about 6%. Yet, the return for the year is still a respectable 16%. So is now a good entry point for Amazon stock, or should investors wait?

3 Megatrends That Will Power Amazon.com, Inc. (AMZN) Stock for Years

Well, of course, it’s extremely tough to gauge where the markets will go from here. It appears a good part of the recent slide in the markets is due to the uncertainty that surrounded the presidential election. What’s more, there are fears of interest rate increases and a potential slowing of the economy.

Despite all this, Amazon is the kind of company that should weather the volatility — at least over the long haul. The fact is that the company is benefiting from several megatrends that should propel sustainable growth. Let’s take a look:

Megatrend #1 for Amazon Stock: E-commerce

According to InvestorPlace.com’s Hilary Kramer, the ecommerce market is still in the early innings: “There is roughly $4.2 trillion a year left in brick-and-mortar sales for Amazon to nibble away at,” Kramer recently wrote. “Even at the rate the company has grown, it’s going to take another decade to conquer that opportunity. Nonetheless, it could potentially hold 10% of all U.S. retail by 2026.”

Even though there will remain fierce competition, Amazon CEO Jeff Bezos has demonstrated — over the past two decades — that he knows how to win. At the heart of the strategy has been an obsession with the needs of customers — even if this has conflicted with profits.

The result is that AMZN has a trusted brand, a tremendous infrastructure and a wide assortment of offerings. Oh, and then there is Prime, which is something that is fairly unique to the company. This service has been critical in strengthening customer loyalty because of the fast deliveries, as well as through offering perks like video and music streaming.

Yet, AMZN is bolstering this with an ambitious program to own its delivery infrastructure, which could ultimately lead to lower costs and faster response times. Keep in mind that the company already leases a fleet of 40 planes.

But AMZN is more than just the U.S. market. The company has also been aggressively investing in foreign markets, such as seen with the efforts in India.

Megatrend #2 for Amazon Stock: Cloud Computing

When AMZN launched Amazon Web Services ten years ago, there was lots of skepticism. Why should an ecommerce company get into the cloud business? And besides, was there much of a growth opportunity in the market?

Yet again Bezos proved his critics wrong — and in a big way. AMZN is now the top player in the fast-growing cloud services business, which is on pace for hitting $13 billion in sales this year. The margins have also been juicy, which has made up for the razor-thin profits of the ecommerce business.

The result is that many mega operators have aggressively moved into the category, such as Alphabet Inc (NASDAQ:GOOGL,NASDAQ:GOOG) and Microsoft Corporation (NASDAQ:MSFT). The cloud is having a transformative change across the technology industry because of key benefits like lower costs, easier maintenance and the leverage of data.

So yes, there is much room for multiple players. Based on Research from Morgan Stanley (NYSE:MS), the global spending is forecasted to jump from $70 billion last year to $141 billion by 2019.

Megatrend #3 for Amazon Stock: Artificial Intelligence

A key to the Amazon stock price has been Bezo’s aggressive investments in new innovations. While some have been embarrassing flops like the Fire phone, there are many offerings that have moved the needle, such as the Kindle and Echo.

But the real game changer could actually be artificial intelligence. This is a category that the top tech operators have been targeting, such as Google, Apple Inc. (NASDAQ:AAPL), Microsoft and International Business Machines Corp. (NYSE:IBM).

As for AMZN, its AI play is at the heart of a technology called Alexa. This is a voice-activated system and is already a part of the Echo, Fire TV and Fire tablet. With Alexa, customers can ask questions and even make ecommerce orders. She is, well, your virtual personal assistant.

In the latest earnings report for AMZN stock, Bezos noted: “Alexa may be Amazon’s most loved invention yet — literally — with over 250,000 marriage proposals from customers and counting. And she’s just getting better. Because Alexa’s brain is in the cloud, we can easily and continuously add to her capabilities and make her more useful — wait until you see some of the surprises the team is working on now.”

OK then, what about the market opportunity? According Tractica, the number of users of AI-powered virtual assistants is expected to surge from 390 million users in 2015 to a staggering 2 billion by 2021.

Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO Strategies, All About Commodities, and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.

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Article printed from InvestorPlace Media, https://investorplace.com/2016/11/amazon-stock-amzn-price-megatrends/.

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