In the run up to Amazon (NASDAQ:AMZN) shares hitting the $1,000 mark in 2017, observers marveled at the broader transformation. Here was a company that had rather humble beginnings that later became one of the most important organizations ever. Thus, AMZN stock reaching four-digit territory was a symbolic threshold as much as it was a financial one.
Fast forward to 2018, and suddenly, the $2,000 level is the new benchmark target for the Amazon stock price. This time, though, shares of the e-commerce firm have had much more difficulty. In late summer of last year, AMZN briefly closed above $2,000, only to give it up shortly thereafter.
This year, the Amazon stock price closed up above two grand for a few sessions in July. But like the first attempt, shares quickly faltered. Unfortunately, the timing of geopolitical headwinds, such as the U.S.-China trade war, along with Amazon’s aggressive efforts to disrupt everything have left stakeholders concerned.
Although I’ve been bullish on AMZN stock for some time, I can appreciate the hesitation. Logically, the current economic environment doesn’t exactly incentivize taking risks on consumer-sensitive investments. Nevertheless, there are three reasons why Amazon may be one of the most recession-resistant companies available:
AMZN Stock Represents Consumer Savings
A key reason why people love shopping online is cost savings. Because e-commerce merchants typically don’t have the overhead of a traditional brick-and-mortar shop, they can pass on the savings to their customers. But with AMZN stock, I’m talking about a much more basic expense reduction: ditching the car.
According to the Bureau of Transportation Statistics, Americans drive a staggering number of miles daily, or 11 billion to be exact. That amounts to almost 40 miles per person per day.
Contrary to popular assumption, only 15% of these daily trips are for commuting to work. The vast majority, or 45%, is for shopping and errands. Depending on how far away you live from your favorite shopping center, that can amount to added fuel charges.
If we succumb to a recession, consumers will likely look for any way to save money. Cutting down on driving is an easy and immediate way to protect the family budget.
Moreover, data from the last recession shows that the growth rate of miles driven declined noticeably from pre-recession years. With e-commerce having become a much more powerful force today, you can expect people to do more online. Ultimately, this benefits Amazon stock.
Amazon Saves Time
We all know the old saying that time is money. And if that’s true, we’re wasting a whole lot of time doing nothing.
According to a Timex survey a few years back, Americans on average wait seven minutes for a cup of coffee, 20 minutes daily sitting in traffic, and another 20 minutes a day waiting for the bus or train.
According to former Timex president Adam Gurian, “Time is our most precious commodity and the results of the Timex survey help detail where our time goes and can also help us prioritize our activities so that we can use the time we do have more effectively.”
Logically, this sentiment lifts the case for Amazon stock. For starters, shopping at Amazon frees you from all the inconveniences associated with shopping: no traffic, no lines, no dealing with unruly shoppers.
More importantly, e-commerce platforms free up time for critical endeavors, such as looking for a job. With the company’s reach extending far beyond just online merchants, you can get many things done under one umbrella. During an economic downturn, this attribute should come at a premium, bolstering the case for AMZN stock.
Amazon Stock Isn’t Just About E-commerce
While we tend to think about AMZN stock as a consumer-driven investment, in recent years, the company has truly expanded its horizons. Today, Amazon is as much a vibrant technology firm as it is an online marketplace specialist.
A perfect example of this is Amazon’s AWS cloud platform. From seemingly out of nowhere, AWS leads market share in the cloud, besting established tech names such as Microsoft (NASDAQ:MSFT) and Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL).
And this isn’t just a “token” dominance for Amazon. Instead, the company is one of the top two finalists for the Defense Department’s Joint Enterprise Defense Infrastructure contract. The other finalist is Microsoft.
If Amazon wins out in this high-profile cloud architecture and services contract, the implications for AMZN stock are obvious. But if not, it’s not the end of the world. As I mentioned above, Amazon’s business coverage is vast and ever expanding. Even under a recessionary environment, the company will always have something to do.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.