If you’re looking for stocks that will deliver impressive gains this year, look no further than e-commerce giant Amazon.com, Inc. (NASDAQ:AMZN). Don’t get me wrong, it’s an expensive pick. Amazon stock has a share price of around $1,530 and a P/E of 332.88. However, those numbers are justified when you consider the amount of growth that lies ahead.
Perhaps one of the most compelling reasons to like AMZN is the company’s position at the top of the food chain in the e-commerce space. Over the past decade, online shopping has gained popularity rapidly, and Amazon emerged as an immediate front-runner in the industry.
However, e-commerce still has a ton of growth potential. In the U.S., e-commerce made up just 9.1% of the nation’s total retail sales. That means there is a lot of growth potential for online retailers like Amazon, especially if it continues to expand into new retail markets.
Another reason Amazon stock tops my list as a reliable long-term pick is the company’s impressive Prime service. Amazon Prime offers a wide variety of perks like fast, free shipping and returns that make shopping online much easier. The convenience that Prime offers has made it possible for Amazon to retain its customers without having to compete on price.
Amazon also offers a slew of other services alongside its Prime service, like a music subscription and video streaming service that make being a Prime subscriber worthwhile. By drawing people in this way, Amazon has created its own ecosystem, much like Apple Inc. (NASDAQ:AAPL) has done. And the result has been loyal subscribers who are hesitant to shop elsewhere.
Another big reason Amazon stock has a bright future is the firm’s cloud computing arm, Amazon Web Services. Not only is cloud computing a rapidly growing industry, but it’s also a high-margin business.
AWS has been working to grow its cloud computing arm, and so far those efforts have been successful. Amazon reportedly has its hooks in some 30% of the existing cloud market and is likely to continue expanding that reach as the market grows.
Amazon has earned itself a reputation as a disrupter of a wide variety of industries and for good reason. AMZN has revolutionized the way people shop, and the firm has been able to thrive in several other sectors from music and movie streaming to cloud computing.
Now, Amazon is pushing its way into the grocery space, and the company appears to have a few more industries in mind as well.
Amazon’s personal assistant Alexa has been a successful push into home automation, and it looks like AMZN is working to add to its influence in consumers’ homes.
Amazon confirmed that it is buying Ring, a smart doorbell maker, which is the next step in the firm’s home-automation plan. Amazon already offers Fire TVs, Cloud Cams and Echo smart speakers, so an automated doorbell makes for a good fit in the firm’s smart-home bundle.
As my colleague Will Ashworth pointed out, Amazon is furthering its ecosystem by making it even easier for people to get tied in. By creating an entire bundle, Amazon is creating a compelling value proposition to customers looking to automate their homes. Rather that trying to piece it all together through various providers, you can do the whole thing through one company.
I wouldn’t be surprised to see Amazon roll out some kind of smart-home bundle, including a subscription fee to take advantage of that opportunity.
The latest in Amazon’s ever-growing reach has been the financial sector. AMZN is working with banks like JPMorgan Chase & Co. (NYSE:JPM) and Capital One Financial Corp. (NYSE:COF) in order to create Amazon-branded accounts. The move would make Amazon a partner with the banks rather than a rival, but will likely benefit the online retailer nonetheless.
Most are expecting to see Amazon closely mirror the framework of PayPal Holdings Inc (NASDAQ:PYPL) by creating Amazon accounts through its partner banks. Those accounts would allow people to store credit from refunds and rewards for later use on Amazon while also cutting down on the fees AMZN pays to credit card companies.
The Bottom Line on Amazon Stock
Amazon’s reach is unparalleled, and the company has proven itself to be successful in filling in gaps for consumers. The company’s long-term future looks bright, and although Amazon stock is expensive, the premium you pay is well worth it.
As of this writing, Laura Hoy was long AMZN and AAPL.