Amazon (NASDAQ:AMZN) continues to have strong, positive catalysts as the coronavirus outbreak continues. Moreover, in recent days, Amazon stock appears to have built up a great deal of momentum. However, investors should keep in mind a few threats the company faces.
As I noted in a previous column, common sense, along with statements by two of China’s largest eCommerce companies, Alibaba (NYSE:BABA) and China’s JD.com (NASDAQ:JD) suggest that Amazon’s eCommerce business will be boosted by the coronavirus outbreak.
I also pointed out that analysts were “upbeat about the ability of large cloud businesses, including those of Amazon and Microsoft (NASDAQ:MSFT), to continue growing during a recession.”
I continue to believe that the inability of many consumers to shop at brick-and-mortar stores, along with the likely resilience of Amazon’s cloud business to economic downturns, makes Amazon one of the better tech stocks to buy.
Further, the product shortages that some brick-and-mortar stores are experiencing should also help Amazon’s e-commerce business, as Brent Thill, an analyst for research firm Jefferies, pointed out in a recent note to investors.
Amazon Stock Has Strong Momentum
Amazon’s shares have risen an impressive 16% since Mar. 12. And according to a Marketwatch columnist, the stock’s chart indicates that ” professional investors such as fund managers and institutions” have been buying the shares recently.
Finally, on March 25, Investopedia identified Amazon as one of five consumer discretionary stocks “with the most momentum” and noted hedge fund manager David Tepper reported that he had been “nibbling” at the shares.
But Thill recently identified several threats facing Amazon, including higher labor costs, fewer items per order, and the same shift to less expensive items cited by Alibaba and China’s JD.com.
Additionally, as of March 25, workers at ten of Amazon’s warehouses had tested positive for coronavirus. If that trend accelerates, the company may have difficulty meeting demand because it could lack enough workers to assemble its orders.
Further, although I don’t expect authorities to close down a large number of the company’s warehouses, such a scenario could potentially occur.
Roku Stock Looks Like a Better Choice
For investors looking for a rapidly growing, consumer-facing tech company that can thrive despite the outbreak, Roku (NASDAQ:ROKU) looks like a much better choice than Amazon at this point.
As I’ve written previously, Roku’s viewership will climb tremendously during the coronavirus outbreak, and companies that are doing well during the outbreak, such as Kroger (NYSE:KR) and Walmart (NYSE:WMT), will likely look to advertise on Roku’s platform.
Unlike Amazon, labor issues shouldn’t cut into Roku’s bottom line or threaten its operations; Roku’s platform can probably be operated by a few people, and its ads sales team should be able to work from home.
Given all of these points, Roku looks like a better, safer choice than Amazon stock amidst the coronavirus pandemic.
As of this writing, Larry Ramer owned shares of Roku stock. Larry Ramer has conducted research and written articles on U.S. stocks for 13 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been GE, solar stocks, and Snap. You can reach him on StockTwits at @larryramer.
