The broader markets are having a rough go of it this year, but you wouldn’t know it from looking at Amazon.com, Inc. (NASDAQ:AMZN). While the benchmark exchange-traded fund SPDR S&P 500 ETF Trust (NYSEARCA:SPY) is up a mere 1%, Amazon stock has gained an unbelievable 35% year to date. Surely, the company is overbought now?
At first, the evidence appears compelling. When the markets closed to a sharp loss on March 19, AMZN stock shed less than 2%. More impressively, the e-commerce giant overcame those losses — and then some. In contrast, the Technology Select Sector SPDR Fund (NYSEARCA:XLK) continues to decline, as Wall Street attempts to regain control.
As the old saying goes, “buy the rumor and sell the news.” Another common strategy is to buy the weakness, and sell the strength. Under ordinary circumstances, you would sell Amazon stock at this juncture. However, a common mistake investors make is limiting this company’s true potential.
Earlier this year, my InvestorPlace colleague Will Ashworth raised a few eyebrows when he stated that AMZN stock will hit $10,000 sooner than you think. That sounds like crazy talk considering that shares only hit four-digits last year. Nevertheless, Ashworth has a history of making seemingly insane, but ultimately accurate, forecasts.
You may remember that Ashworth called for $10,000 bitcoin when most analysts were calling it a bubble. For better or for worse, he was right multiple times. Now, he wants to do the same with Amazon.com, Inc.
Citing long-term technical strength and a rapidly growing consumer base, Ashworth believes we could see $10,000 Amazon stock inside eight years. It’s an ambitious target, but I think it’s well within the realm of possibility.
In short, AMZN stock is a raging bull that you don’t want to mess with!
Amazon Stock Has Incredible Staying Power
Think back to the year 2000. Microsoft Corporation’s (NASDAQ:MSFT) Internet Explorer was the most popular web browser. Alphabet Inc (NASDAQ:GOOG,NASDAQ:GOOGL) was hardly a blip on the radar. Consumers considered Sony Corp (ADR)’s (NYSE:SNE) portable music players as cool and hip.
Things change. And when you’re talking about the broader technology sector, things change in a nanosecond. But do you know the one constant you can always depend upon? People always opening their wallets (or their portfolios) for Amazon.com, Inc.
Back in 2000, Amazon scored an 84 out of 100 customer satisfaction points, according to the American Customer Satisfaction Index (ACSI). Last year, the company’s ASCI was 85. But what is particularly impressive is that AMZN’s ASCI has never fallen below 83. From its highest ranking since 2000 (88 points), the margin between its most and least satisfying years is only 6%.
Amazon, the company, consistently nails it out of the park. Obviously, it gives the customers what they want, and nothing that they don’t. It’s Business 101, and that’s why Amazon stock is a beast. Don’t go contrarian unless you know that management is taking the organization in a different direction.
While I think the customer is everything in a retail-oriented business, just look at Amazon’s revenues. I’m not just referring to the total annual growth, although that’s extremely impressive, but consider the individual line items. Every single business unit (except “physical stores,” which just came out last year) is growing at a healthy, double-digit rate.
Amazon’s business units averaged 42% and 46.5% sales growth in 2015 and 2016, respectively. In 2017, that figure “slipped” to just under 42%.
As I stated last month, AMZN stock is an investment you can almost always trust.
Put Amazon.com, Inc. on Autopilot
I seldom recommend putting investments on autopilot. The markets are a wild place, especially right now. However, Amazon stock has proven its worth several times over.
In my opinion, common assessments like “overbought” or “oversold” don’t work well with AMZN stock. While management has the safety cushion of operating a moat in e-commerce, they act like they have a chip on their shoulders. They never relax, always look for opportunities, and crush people that get in their way.
I like that in a company (unless I’m invested in the company getting crushed). Because what could be more intimidating than a moat that’s constantly getting bigger and more aggressive?
Amazon.com, Inc. has weaknesses in the way that Mike Tyson in his prime had weaknesses. But would you want to go toe to toe with Tyson? I wouldn’t do it right now, even though he’s well past his boxing days.
So it is with Amazon stock. The company has mind-blowing growth in all its businesses, especially lucrative ones like AWS. More importantly, AMZN never fails to serve its customers well.
What more could you ask for in an investment?
As of this writing, Josh Enomoto is long SNE and bitcoin.