There are only a few stocks right now that you can really count on for regular profits. And one of those is Amazon (NASDAQ:AMZN) stock.
Orders from shoppers forced to stay at home are overwhelming Amazon warehouses, and the company even reportedly made the decision to postpone its popular Amazon Prime Day event until August.
Overall, though, the surge in deliveries is just one reason why I love Amazon stock today. And with that in mind, let’s take a closer look at this mammoth company.
Amazon Flourishes in the Stay-at-Home Culture
With the vast majority of Americans living under stay-at-home orders due to the novel coronavirus pandemic, there’s little to do except for find new ways to entertain the kids, putter around the house and do some online shopping to fulfill their basic household needs.
That said, this ties in perfectly to Amazon’s strengths.
Amazon has been absolutely flooded with orders. It recently announced plans to hire 75,000 more employees to deal with increased online orders. This comes after it already hired 100,000 workers in March, and told customers they could expect longer-than-usual delivery times because of the volume of orders.
It also announced its suspending its Amazon Shipping program in the U.S. “because it needs its people and capacity to handle a surge in its own customers’ orders.” Amazon Shipping is a pilot program that was only available in a few cities to deliver non-Amazon packages, competing directly with FedEx (NYSE:FDX) and UPS (NYSE:UPS).
Moreover, people are using Amazon to buy everything from food to household supplies to things that will entertain kids now staying home 24/7. And with more people relying on Amazon for their shopping now, the more they’ll be likely to use it again the next time they need something.
So collectively, the coronavirus forced many stores to shut down or offer online-only sales. And nobody does online retail better than Amazon.
Streaming Services Shine for Amazon Stock
When you’re done with your online shopping, there’s nothing better than curling up with a new movie or binge watching a show. After all, it’s not like you can go out to a dinner and movie.
That said, Amazon stock is benefiting by the new normal brought on by the coronavirus pandemic.
Streaming services like Amazon Prime Video, Netflix (NASDAQ:NFLX), Hulu, Disney (NYSE:DIS) Plus and HBO are churning out so much solid programming that there hardly seems to be a need for traditional cable companies any more.
Amazon’s streaming options may not be as widely known as those on other services, but the quality is top-notch. Amazon won 15 Emmys last year, including “Fleabag” for best comedy. So it’s not like their Amazon original programs are second-rate options.
AWS Is a Difference-Maker for Amazon Stock
Amazon Web Services (AWS) may be bringing up the rear in this story, but the company’s signature cloud computing business is always a top reason to own Amazon stock; Even before the pandemic.
AWS includes nearly 200 products and services that provide a number of different options for users. These icnlude analytics, developer tools, business applications, machine learning and control Internet of Things devices. Many companies, including Netflix, Hertz (NYSE:HTZ) and Intuit (NASDAQ:INTU) use AWS to power their entire IT operations.
Additionally, in the fourth quarter of 2019, AWS generated nearly $10 billion in revenue — up 34% from a year ago. And that windfall was despite Amazon losing a mammoth $10 billion Department of Defense contract to Microsoft (NASDAQ:MSFT).
AWS is important for Amazon stock because its mammoth success gives the company its profit margin. AWS represented only 12% of Amazon’s total Q4 revenue, but more than 67% of the company’s operating income from the quarter was attributed to AWS.
The Bottom Line on Amazon Stock
Amazon stock is up nearly 22%% so far in 2020, faring much better than the Nasdaq Composite and its 6% loss.
Also, the stock is expensive, with a trailing price-earnings ratio of 89 and a price-book ratio greater than 16. However, this is one of those cases when the quality of the stock exceeds the value.
Overall, Jeff Bezos has been a masterful CEO. And with that, Amazon will emerge from the coronavirus not devalued, but actually elevated in importance to the market.
AMZN stock has an “A” quantitative rating in my Portfolio Grader, and is gets a “B” overall.
Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.