Shares of Amazon (NASDAQ:AMZN) have definitely had a solid rally off the lows, but does that mean investors missed their chance to go long? Indeed, Amazon stock is up about 27% from its lows, but, keep in mind, it’s still down almost 20% from its highs.
Some investors will say that means we’ve already missed a bulk of the rebound and that investors should consider taking profits or, at the very least, staying on the sidelines. I’m not saying that we should go all-in right here, right now. But keep in mind: it wasn’t all that long ago that investors would have killed to get in below $1,700.
Now, they have another chance. Let’s look at a few reasons investors should consider a long Amazon stock position.
Growth
Of course, one of the top reasons to consider buying Amazon is its growth. Thanks to its industry-leading cloud business, Amazon Web Services, the company has robust top- and bottom-line growth.
The company will report earnings on Jan. 31. For the full year, analysts are expecting earnings per share of $19.85 on revenue of $232.36 billion. If achieved, it will represent growth of 335% and 30.6%, respectively. For 2019, estimates call for another 36% earnings growth and 20% sales growth.
While that certainly represents a year-over-year deceleration in the growth rate (although not a decline overall), it’s still pretty impressive numbers for a company that has a long runaway ahead of it — particularly for a company of this size, at $810 billion.
While Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT) and Alphabet (NASDAQ:GOOGL, NASDAQ:GOOG) all have more attractive valuations, Amazon stock has never been cheap on an earnings basis. Not that that’s a reason to buy necessarily, but the stock’s ten-year return of 3,160% shows that it hasn’t hindered its performance.
Amazon’s Businesses
The second reason to consider owning Amazon stock is the company’s vast moat. Its Prime membership — with two-day shipping (or better), cloud storage, music and more — is a huge generator of cash flow. Its Whole Foods acquisition was a profitable entity when purchased and allows Amazon an entry into one of retail’s biggest footprints with grocery.
Its online business remains robust and let’s be honest: e-commerce isn’t going anywhere. That bodes well for Amazon in both the short and the long term.
Finally, Amazon’s advertising business and cloud-computing business offer plenty of growth opportunity over the next few years and beyond. This gives investors confidence that the growth can continue, particularly with the other business segments Amazon has brewing.
Trading Amazon Stock
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Finally, the Amazon stock chart is a third catalyst to consider getting long. As we mentioned, shares are still well off the highs and while $2,050 a share is likely a ways away, getting in more than 20% below that price is an opportunity.
Admittedly, AMZN is sitting just below some notable resistance between $1,700 and $1,750. Additionally, the stock is technically trending lower. That said, shares are consolidating nicely above the 21-day and 50-day moving averages. Further, there is some decent support near $1,450 — even if AMZN stock overshot this level in December.
With that in mind, investors who are looking at AMZN stock can justify taking a small position now. They can then add to the stock on a further decline.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell is long AAPL, GOOGL and AMZN.
