The physical economy continues to crash, with rampant unemployment hitting levels we’ve never experienced. While social distancing and limited movement on the streets shifted people’s interest to basic living, even Amazon (NASDAQ:AMZN) stock got the jitters amidst the hard-hitting waves of coronavirus. But as the country and world begin to peer out the windows at the height of the pandemic, Amazon stock appears in great shape.
When we talk about Amazon, as an e-commerce mammoth, the scenario was quite depressing. Amazon highly depends on the Chinese manufacturers for the supply of goods. As the virus first hit China, the slowdown and shutdown of factories did affect the supply chain. Besides this, lockdowns also impacted the scale of the demand.
There is a gap between the supply chain and the demand, and Amazon is clearly at the losing end. The company is juggling to offset the delayed shipment and absence of stock challenges. However, the umbrella services offered by the company is helping it sail through the biological storm.
Amazon Stock: Prime Video Brownie Points
Amidst the low sales performance from the e-commerce front, the company has high expectations from the digital streaming segment. The television rating specialist, Nielsen, remarked, “Staying put in our homes can lead to almost a 60% increase in the amount of content we watch.” As expected, the “stay-at-home” cohort is seeking refuge in on-demand streaming. The continuous updates and fresh content meet their entertainment needs.
And Amazon Prime Video is witnessing a surge in the consumption and subscriber count, as television channels run out of fresh content. In contrast, the 30-day free trial and an affordable monthly price look mighty attractive to a captive audience. Besides this, more time at home means more need for entertainment. Kindle and Amazon music is set to make a handsome cut out of these services.
But tet another reason to remain bullish Amazon is the company’s stronghold on cloud computing.
Prior to the lockdown, numerous companies started renting computing from Amazon, Microsoft and Google. As millions of employees work from home, there will be a shift from the in-house data storage and processing to a cloud-based one. The cloud web hosting platform of Amazon Web Services has announced $20 million to speed up the R&D of diagnostic solutions. Nearly 35 research institutions across the world are braced to leverage the benefit of the program.
The clients of Amazon Web Services range from small scale companies, mid-to-large scale companies and even non-profit organizations. AWS contributed a rise of about 34% in the fourth quarter, and the lockdown is sure to bring in more opportunities for the company.
Amazon Recovers and Moves Upward
Amazon stock has witnessed a surge of about 42%, after plunging to a one-year low on March 16. Looking at the conditions in the previous month, the “buy” attribution to the stock was debatable. However, conditions improved for the company as the Chinese market opened up, and even more so as the U.S. gears toward reopening.
In the coming months, the numbers may shuffle, given the cautious nature of this market. However, as lockdown conditions lift in various countries and states in the U.S., the supply chain will return to normalcy, albeit at a slow pace.
As per the indications, the Chinese suppliers will strive to push the bars to restore the economic conditions in their countries. As a result, the disrupted supply chain will again be streamlined.
In the coming weeks and months, and unless we see a resurgence in coronavirus cases and deaths, the bulls will continue to run with Amazon.
As of this writing, Ronak Shah did not hold a position in any of the aforementioned securities.
