Amazon.com, Inc. (AMZN) has proven itself to be a major market force over the last few years as the online retailer quickly gained popularity among the public. At more than $700 per share, it may seem like AMZN stock has already reached its peak, but based on the company’s glowing quarterly results and exciting long-term plans, the share price may still have room to grow.
AMZN stock has benefited from the company’s dominance in the retail space and its site has completely disrupted the industry.
Amazon attracted customers’ attention by selling books at competitive prices, but the company has since extended its reach into everything from electronics to apparel.
This earnings season, Macy’s, Inc.’s (M) dismal earnings report stood in stark contrast to Amazon’s — proving that the site is steadily gaining ground against seasoned competitors. The results suggested that Amazon could overtake Macy’s as the largest clothing retailer in the country as early as 2017.
AMZN Stock’s Long-Term Strengths
Amazon has been working to make its online marketplace even more appealing to consumers by adding new delivery options and subscription services that offer perks to members. Amazon Prime offers free expedited shipping to its members, but perhaps more importantly, it provides access to AMZN’s library of movies and TV content.
Online streaming is gaining popularity quickly as more young people cut the cord and move away from traditional cable. Netflix, Inc. (NFLX) has been the biggest player in this space for the last few years, but Amazon is hoping to change all of that over the next 12 months, as the company ups its spending on content.
According to CFO Brian Olsavsky, customers who use the video option during their trial Prime membership are more likely to pay in order to continue, a sign that the streaming space is a good place to grow. Not only that, but Amazon is hoping to capture customers who want to stream but aren’t interested in the shipping benefits that Prime offers by rolling out a streaming-only subscription service.
However, e-commerce isn’t the major reason investors should consider AMZN stock. Sure, Amazon has rolled out several impressive new in-house product lines that should increase margins and beef up the bottom line, but what gives AMZN the most growth potential is its other endeavors.
One of the biggest benefits of owning AMZN stock is the company’s intense focus on future growth and expansion. This is especially evident when you look at Amazon’s efforts to grow its cloud-computing platform, Amazon Web Services.
So far, AWS has been a success for AMZN, generating 56 percent of the company’s operating profits despite being a relatively new business. Some believe that AWS will be a game-changer in the IT space and that the company will dominate the cloud computing space as it develops. This potential growth is seen as increasing AMZN’s value tenfold over the next decade.
Is AMZN A Good Buy?
Over the past decade, Amazon has proven to be an innovative company that is capable of turning ideas into action, but at roughly $700 per share, it is an expensive buy. However, the company’s latest earnings results suggest it’s in a strong financial position and that its future prospects look bright.
Despite its monumental growth over the last few years, many analysts believe that AMZN stock could make its way considerably higher over the next few years, especially considering its foothold in the growing cloud-computing space.
As of this writing, Laura Hoy did not hold a position in any of the aforementioned securities.
