Buy Amazon Stock: When the billionaire investor – Warren Buffett was asked why he’s not buying Amazon shares, he had a simple answer.
“Stupidity” Buffett said during an interview on CNBC’s “Squawk Box.”
Amazon has done well during the pandemic, and the company is one of a handful with over a $1 trillion valuation. That swell already had many investors wondering whether they should buy Amazon stock, but the interest picked up on March 9 when the company announced a 20-for-1 stock split.
What that means: Current Amazon investors will get 20 shares for every one share they own, though the total value of their shares remains the same. New investors will be able to buy shares of the stock for significantly less
Investing in Amazon is Synonymous With Investing in “The Best Businessman in the World”
It’s not lost on anyone that investing in Amazon is synonymous with investing in the world’s richest man, Jeff Bezos (although recently Bezos and Elon Musk, founder of Tesla, are vying for this position).
The entrepreneurial skills of Amazon’s founder and current Executive Chairman are undeniable. Many consider Bezos one of the most astute businessmen in the history of mankind.
Remember that Bezos created Amazon in 1994, and in just over 20 years managed to position Amazon in the leading company it is today; becoming, along the way, one of the richest people in the entire history of mankind.
He owned about 11.2% of the company, as of his most recently reported transaction (a stock gift) on March 1. His stock is worth more than $108 billion as of the market close on March 31. That stake should provide plenty of motivation for Bezos to run the company in such a way as to increase the stock’s value over the long haul.
Online Shopping Continues to Grow in Popularity Around the World
Amazon’s international business is also poised to keep benefiting from this global shift toward shopping online. In 2019, e-commerce sales accounted for 14.1% of all retail sales worldwide, up from 12.2% in 2018. This figure is expected to reach 22% in 2022
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Amazon is Much More Than an Ecommerce Platform
There are many other reasons to buy Amazon stock. These include the company’s burgeoning smart-home business, centered on its artificial-intelligence-powered assistant Alexa, and its budding healthcare business, which includes its online pharmacy PillPack.
Moreover, in its e-commerce business, advertising revenue is increasing, and the company is expanding the number of private-label items it sells.
Its E-commerce Business Will Never be Dethroned
Amazon is the largest online retailer in the U.S. and in the world. It’s so far ahead in the U.S. market (and making good inroads abroad) and has such a mighty moat that it is highly unlikely that any competitor will dethrone it.
The company’s main competitive advantage is Prime’s free and fast delivery of a huge range of products. This core benefit is only possible because of Amazon’s extensive network of highly efficient and massive fulfillment centers. It would cost a king’s ransom to duplicate this network. And even if a competitor were successful in replicating the physical structures, it would probably take many years for it to achieve Amazon’s level of efficiency.
The company currently has 170 fulfillment centers in the U.S., with plans for 51 more, according to logistics consultant MWPVL International. It has 188 such facilities outside this country. These numbers don’t include delivery stations and various others types of facilities.
U.S. Online Sales Continue to Take Market Share From Brick-and-Mortar Sales
Americans increasingly prefer to do their shopping online, which provides a tailwind for Amazon’s domestic business. In the fourth quarter of 2019, e-commerce sales accounted for 11.4% of all U.S. retail sales, according to the Census Bureau. For full-year 2019, 11% of total retail sales were transacted online, up from 9.9% in 2018.
E-commerce sales will never come close to reaching 100% of all retail sales. But certainly, that 11.4% figure has a lot of room for growth.
The Pandemic Should Benefit Amazon Over the Long Term
Regardless of how the short term plays out, Amazon should benefit from the crisis over the long term. Surely, many people who weren’t members of Amazon’s Prime loyalty program before the pandemic have become members in order to get free and faster delivery during the crisis. Long after it’s over, some folks will likely continue to be heavier online shoppers than before the pandemic.
Amazon Prime membership is growing briskly
The total of Prime members has been growing at a nice clip. In January, Amazon announced there were more than 150 million Prime members worldwide. In 2018, the company said it had more than 100 million members globally.
This growth is important because Prime members have been found to spend more money than nonmembers on the company’s site. One study has pegged the average member’s annual spending at more than double that of the average nonmember.
Bottom Line
Among Wall Street’s top financial analysts there is a nearly unanimous consensus when it comes to investing in Amazon. Out of 50 financial analysts surveyed, 48 either recommend buying its stock immediately or estimate that Amazon’s stock growth will outpace that of its competitors. The remaining 2 analysts give it a “hold” rating.
If you’re ready to buy Amazon stock, log into your online brokerage account or trading app. Then type in Amazon’s ticker symbol (AMZN) and the number of shares you want to buy or the amount of money you want to invest.
