It was just three short years ago when Amazon (NASDAQ:AMZN) cracked the $1,000 per share mark. It only took the stock another year to hit $2,000 per share. And then this year, AMZN stock passed $3,000 per share. However, in the last two years, it hasn’t been all smooth sailing for Amazon.
Some of it may be considered guilt by association. Amazon stock is part of the group of stocks that are collectively known as the FAANG stocks. And at various times in the past few years, these stocks have drawn the ire of advocacy groups and legislators over concerns about consumer privacy.
In each case, Amazon has come bouncing back. But with volatility expected in the market for the rest of 2020, there is some sentiment that the current dip in AMZN stock is not a buying opportunity. There are some longer-term concerns hanging out there. But in the here and now, Amazon looks like a solid buy for a few reasons.
Amazon Is More Than E-Commerce
Amazon has been flexing its considerable e-commerce muscle during the pandemic. However, one reason for the growth in the stock over the last 10 years is the company’s pivot into other businesses in addition to e-commerce. One of those areas is its cloud computing arm, Amazon Web Services (AWS). Another is the company’s own streaming service, Prime Video.
And the global pandemic brought on by the novel coronavirus has moved all of these business units front and center. Consumers are using the company’s e-commerce services to keep their homes well supplied. Businesses are using AWS to ensure their businesses run smoothly from remote locations. And Prime Video is getting a chance to show its value to consumers.
Tis the Season for Amazon
Even if you accept the premise that the market will be volatile, it’s hard to bet against Amazon as we enter the holiday season. This is likely to be an unusual holiday season and the need to get packages to loved ones far and wide will be essential. In June 2020, Amazon announced they had added 12 new cargo planes to Amazon Air.
And Amazon is continuing the hiring spree that it went on at the onset of the pandemic. The company has also made clear that many of the jobs they are filling will expand beyond seasonal help.
The Election Is Likely to Be Messy
Amazon will do what it does regardless of which party is in power. But the company has the unique ability to unite both parties in their dislike for the tech titan. However, Amazon has drawn particular attention because of AWS.
Some nimble retailers are learning how to, at the very least, compete with Amazon in e-commerce. It’s a different story with AWS. Many small businesses are terrified of what the company can do. In short, it copies and integrates software that other companies introduce. It then makes its services very convenient to use and uses bundled discounts to price out competitors.
This is causing many public officials, including President Trump, to call into question the company’s business practices. Some legislators have even called for breaking Amazon into separate business units. In fact, Amazon and the Trump administration had a very public spat in late 2019 into early 2020 on reports that President Trump had personally intervened to prevent Amazon from winning the $10 billion Joint Enterprise Defense Infrastructure (JEDI) cloud computing contract.
Basically, a prolonged election will keep the politicians distracted, which will mean Amazon will enjoy a temporary respite from political scrutiny.
Could AMZN Stock Split?
There is some speculation that Amazon may split its stock. If the stock were to make it back to $3,000, a 6-for-1 split would make the stock a bit more accessible to retail investors. This is particularly true for investors who can’t buy fractional shares. But so far, this is just the musing of analysts. Although Amazon has split its stock in the past, it has given no indication that it plans to do so.
If the stock splits, it will be a nice holiday gift for investors. But even if it doesn’t, it’s hard to see a scenario where AMZN stock doesn’t move higher.
On the date of publication Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Chris Markoch is a freelance financial copywriter who has been covering the market for over six years. He has been writing for Investor Place since 2019.