Amazon.com, Inc. (NASDAQ:AMZN) is a classic example of an investment that sells itself. It’s not just for the fact that AMZN stock belongs in the elite group of “FANG” stocks, which includes Facebook Inc (NASDAQ:FB), Netflix, Inc. (NASDAQ:NFLX), and Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL). That categorization certainly helps Amazon stock.
But more importantly, it’s the fact that the e-commerce giant is purely ubiquitous.
Over the years, I must have written about a thousand companies, or more. Invariably, I have my favorites. Sony Corp (ADR) (NYSE:SNE) and Japanese consumer techs are always good topics for me because I know how they operate. Gold and guns I find profoundly thought-provoking because who knows? Informal presidential advisor Alex Jones might be right about pending economic collapse and worldwide martial law.
However, none of these companies or sectors impacts my life as much as AMZN.
I suspect it’s the same for you. Am I alone in going to a Best Buy Co Inc (NYSE:BBY) store and logging onto Amazon.com, just to make sure I’m really getting the “best buy?” I thought not. You want to know why the AMZN stock price is so dominant? Your actions answers your questions.
True, what I’m proposing is completely anecdotal. The difference between analyzing Amazon stock and (insert company name here) is that these anecdotes are repeated millions of times. As in worldwide and daily. Frankly, many analysts can just offer a buy recommendation, and come back a year later looking like geniuses.
AMZN Stock Is Pushing All the Right Buttons
Of course, we have a job to do, so let’s get to it. If there is a reason to be concerned about AMZN stock, it’s their forward guidance. Management chopped its profit outlook to a range between $250 million to $900 million. This contrasts sharply with an initial consensus estimate of $1.33 billion.
On paper, that’s an ugly drop, prompting early calls for selling Amazon stock. However, as InvestorPlace contributor Chris Tyler points out, this assumes “aggressive investments in media, fulfillment and India.” I hope nobody took the premature warnings seriously, as AMZN stock is up 13% this year.
Any pessimism has to be countered with what the company is doing right. InvestorPlace contributor Laura Hoy lays out an excellent argument that “e-commerce is just getting started.” Despite the sector’s seeming dominance of retail — and brick-and-mortar’s demise — the potential for growth is vast. E-commerce still makes up only a small percentage of the overall retail picture. Therefore, selling AMZN stock on the basis of excessive technical momentum is ill-advised.
In addition, the online retail giant isn’t sitting on the laurels of past achievements. Instead, AMZN is constantly seeking an edge towards the next big thing in tech. That in all likelihood is the cloud. To no one’s surprise, the company has a massive footprint in the growth sector with Amazon Web Services.
Finally, Amazon stock is ironically becoming an investment in the brick-and-mortar space as well. It’s just that they’re doing it smarter than anyone else — again, no shocker there. Amazon Go, with its automated payment processors, is retail of tomorrow available today.
Amazon Stock Set to Have Another Great Year
Still not convinced? Let’s take a look at some numbers. One of the best qualities of AMZN stock is its consistency. Based on early data, it’s fairly easy to predict how Amazon stock will stack up by year’s end.
Click to Enlarge From this statistical analysis, 2017 is looking to be another solid outing for AMZN. First-quarter returns for the e-retailer is averaging 3.4%. Annual returns, on the other hand, average 84%. Just by that figure alone, you can tell it’s better to be long than to be short Amazon stock.
But drilling a little deeper is where we find our data gold. Of the times when AMZN stock fell short for the year, the first-quarter performance was always ugly. That is a 100% record. Sometimes, Amazon stock will produce a profit despite a poor Q1 in the markets. Never, though, has AMZN fell into the red annually, and produced a positive Q1.
At 14% year-to-date, shares are well on their way to producing a profit by March end. If so, you want to play it safe and not do anything stupid like short AMZN stock. If the e-commerce giant goes under for some weird reason, then the choice is up to you.
Still, I don’t like the idea of doing anything that requires Amazon to suffer for a prolonged period of time.
As of this writing, Josh Enomoto is long SNE stock.