At first glance, everything appears to be going right for Amazon (NASDAQ:AMZN). After a tough second half of last year, and some unnecessary personal scandals involving CEO Jeff Bezos, Amazon stock regained its mojo. Having spent the last two weeks climbing back to above the $1,900 barrier, AMZN stock seems, psychologically, ready for the trip to $2,000.
But is that really the case? Another possibility is that the $2,000 level will represent strong technical resistance for Amazon stock. Let’s face it: this recent bout of bullishness couldn’t have come at a more awkward time.
Primarily, the U.S.-China trade war imposes an overhang on AMZN stock. Because the ecommerce juggernaut is levered toward multiple businesses, thanks to its disruption ethos, Amazon had some geopolitical protection. However, even a dominant force like this can’t ignore the prospects for prolonged tensions.
And by the way, the multiple disruptions are also risk factors. For example, a drawn-out trade war will likely result in a million Americans losing their jobs. That would create a ripple effect that would devastate consumer sentiment.
Obviously, such a situation will hurt most aspects of AMZN stock, not just e-commerce.
Still, I think AMZN is a remarkable organization. Hard evidence also shows that standard business rules don’t apply to the company. Therefore, despite some nearer-term challenges, I like Amazon stock for the long haul. Here are three reasons why:
Alexa? Are Smart Speakers a Game-changer for AMZN Stock?
If you just looked at the technical charts for Amazon stock, you’d come to a mistaken assumption that the underlying company has no ongoing controversies. Of course, the reality is that Jeff Bezos and company are surely feeling some regulatory heat.
I say this because the Federal Trade Commission and the Department of Justice are eyeballing the FAANG stocks for improprieties. In addition to AMZN, we’re talking about Facebook (NASDAQ:FB), Apple (NASDAQ:AAPL), and Alphabet (NASDAQ:GOOGL). Fortunately for streaming investors, Netflix is off this undesirable list.
These particular investigations focus on anti-competitive practices. But the broader point is that, as a large organization, Amazon attracts regulatory attention. This attention covers a range of issues. For instance, Facebook’s Cambridge Analytica scandal sparked privacy concerns against other tech firms, including AMZN.
Given the rising trend of anti-big business sentiments, Amazon stock faces longer-term challenges. But its recent development involving its Echo smart speakers could redirect oversight issues in a favorable direction.
Bloomberg ran a story explaining that the Echo could detect the unusual sleeping noises associated with heart attacks. It’s quite literally a life-saving technology that deserves additional investigation and support.
It also flips the privacy issue on its back. In this case, you’d want the Echo to violate your privacy if it means saving a loved one’s life.
Not only that, Amazon can make the argument that its large organizational structure is needed to develop these groundbreaking innovations. That might put oversight committees in a difficult position, indirectly helping AMZN stock.
Amazon Stock to Rise from Comprehensive Retail Dominance
I don’t blame investors for experiencing some confusion when dealing with Amazon stock. The underlying firm spreads its disruptive canvas far and wide. From cloud computing to groceries, Amazon does it all.
But from an investment perspective, it’s important not to forget the core catalyst driving AMZN stock: retail. Sure, divisions like AWS and the aforementioned smart-speaker lineup offer compelling narratives. However, this is still very much a retail play.
To that end, Amazon is getting very exciting again. First, let’s mention the obvious: e-commerce is steadily representing a greater piece of the total-retail sales pie. In the first quarter of this year, more than 10% of all retail revenue originated from e-commerce platforms.
All indications suggest that this trend will move higher. Even during recessions, e-commerce has made strides. Since Amazon dominates the digital marketplace, it’s only logical to assume AMZN stock also jumps in value.
Moreover, Amazon is also going after the last holdout of the modern retail environment: lower-income consumers. People in this category prefer shopping at big-box discount chains or dollar stores. But AMZN will introduce a series of incentives, including EBT-card acceptance, to sway this demographic.
Let’s give it up for management, which is making yet-another smart decision. With the 5G rollout coming, telecommunication services will reach a wider audience. Older but still very adequate technologies will become cheaper, encouraging lower-income consumers to advantage e-commerce conveniences.
And when you’re talking e-commerce, all roads eventually lead to Amazon stock.
Old Rules Don’t Apply to AMZN
I hesitate to mention this, but when you look at Amazon as a whole, you can’t help but think that it’s a near-miraculous company.
Usually, organizations involved in disparate businesses attract criticism. That’s especially true today, with the likes of General Electric (NYSE:GE) struggling for both traction and relevancy.
AMZN really shouldn’t be doing so well. It wasn’t satisfied dominating e-commerce, so it moved into multiple sectors: physical commerce, cloud computing, video games, groceries, health care, and the list goes on. It’s a modern-day GE.
Yet they find a way to make it work. Since at least Q4 2006, Amazon has never experienced year-over-year revenue growth below double digits. That’s just a remarkable phenomenon made even more impressive that the company must contend with the law of large numbers.
Overall, this gives me the confidence that you can hurt Amazon stock, but you’ll never keep it down forever.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.
