If the last several months have shown you anything, it’s that doubting Amazon.com, Inc. (NASDAQ:AMZN) is detrimental to your portfolio. Still, I understand the temptation, especially at this juncture. Presently, Amazon stock is up 23% year to date, after having blasted through the four-digit barrier last year. How long can this momentum possibly continue?
Despite my overall bullishness towards AMZN stock, it’s a concept with which I struggle constantly. Again, not too long ago, we were marveling at shares hitting $1,000. Back then, critics argued for a slowdown in the price, if only due to simple market dynamics. If it was any other company, I’d agree. But with AMZN, the normal laws of gravity don’t apply.
That said, on a nearer-term basis, I noticed that Amazon stock hasn’t decisively broken the $1,450 level. This is approximately where the company gapped down to near the end of March. Ordinarily, you’d expect AMZN to mount a bullish response. However, that hasn’t come about yet.
Perhaps it will — and soon. But I also can’t help but notice that AMZN stock spent multiple sessions attempting to break out of this resistance barrier — each time with no success. Moreover, the current price action is below the 50-day moving average, a commonly-viewed barometer indicating nearer-term strength (or weakness).
Setting aside personal biases for Amazon stock, investors shouldn’t be surprised to see technical weakness in the coming weeks. Due to its inability to move past $1,450 with conviction, Amazon’s chart looks like a bearish head-and-shoulders pattern.
As I mentioned, these are temporary considerations, more useful if you’re attempting to time the market. For those with a longer-term view, Amazon’s aggressive foray into lucrative sectors, such as their AWS cloud-computing platform, should prove decisively successful.
AWS is the Real Deal
I don’t need to mention that cloud computing is serious business. According to Forbes contributor Louis Columbus, Amazon’s AWS, along with Alphabet Inc (NASDAQ:GOOG,NASDAQ:GOOGL) and Microsoft Corporation (NASDAQ:MSFT), will “capture 76% of all cloud platform revenue in 2018; expanding to 80% by 2020.”
In addition, “The total global public cloud market will be $178B in 2018, up from $146B in 2017, and will continue to grow at a 22% compound annual growth rate (CAGR).” Good thing, then, that Amazon’s AWS platform is the fastest-growing revenue-contributor among its businesses.
In 2014, AWS brought in $4.64 billion in top-line sales. Last year, that haul jumped to a whopping $17.46 billion, or a 276% increase. And since 2014, its sales growth rate has averaged 56%, which is notably higher than Amazon’s second-ranked business category, “Other”.
But it’s not just the growth rate that’s significant for Amazon stock. The AWS platform increasingly represents a larger portion of the total revenue picture. In 2014, the company’s cloud services accounted for only 5.2% of the total haul. Last year, the allocation was slightly over 9.8% against worldwide sales of nearly $178 billion.
Undoubtedly, this is a massive cash cow for AMZN stock. But what’s really scary is that AWS may just now be spreading its wings.
To some extent, we’re seeing this trend with the AWS platform. The difference, though, is that quarter-to-quarter sales growth remains robust. Since the beginning of 2014, average QOQ growth is 11.3%, approximately what the rate was for the previous three quarters.
In other words, AMZN is going to put on a clinic, which is just another reason why you should buy Amazon stock.
Too Many Positives for AMZN Stock to Ignore
I haven’t even touched on other fundamentals, such as its aggressive posture. Amazon is a pure disruptor, offering no mercy and expecting none. It’s ruthless, but you have to love having a real-life Gordon Gekko driving your portfolio.
Which brings me to my concluding argument, one that I have emphasized in the past. As a long-term investment, you will not find a better play than AMZN stock. The company utterly dominates online retail, has severely disrupted brick-and-mortar retail and is constantly on the prowl for victims. And, by the way, these victims don’t necessarily have to involve technology!
Bottom line: Amazon stock is as automatic as you can get in the markets. Consider any dips as buying opportunities.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.
