Amazon (AMZN) Stock Analysis & Forecast

Updated: 8th Jan 2022 Written by Sean Graytok
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If you’re deciding whether or not to invest in this FAAMG stock, you’re in the right place. Here’s what you need to consider before buying Amazon stock.

Amazon Investment Potential

Amazon has a market cap of $1.7 trillion but continues to grow and innovate like an agile startup.

Amazon’s customer-obsessed culture is the foundation of its success – it stops at nothing to improve the customer’s experience.

Amazon refuses to rest on its laurels, going from two-day delivery to one-day, to same-day, to 2-hour, and soon too before you even know you want whatever it is you’re ordering. It’s always day one at Amazon.

This attitude is stitched into the fabric of the company.

It is one of the many reasons why we’re excited about Amazon’s investment potential for many years to come. 

Amazon Stock Moat

A company’s “moat” usually refers to its competitive advantage over other players in the space, which allows it to protect its market share and profitability.

If a company has a weak barrier against the competition, then other firms can swoop in and take a piece of the pie, possibly impacting a company’s stock.

We believe that Amazon’s innovative culture is its moat. It has a proven, and repeatable processes that can be applied to sector of the economy that Amazon competes in.

This recipe is why Amazon can start out as a bookstore and evolve into a e-commerce, grocery, streaming, healthcare, and cloud computing giant.

Speaking of the best cloud computing stocks: Amazon Web Services (AWS) is another key aspect of the company.

The web services arm of the empire rakes in enough profits to essentially subsidize the company’s other pursuits.

AWS enables Amazon to play the long game in streaming, for example, allowing Amazon Studios to operate at a loss for years.

>> More: Best Stocks to Buy

Amazon Competitors

You should evaluate Amazon’s competitors before buying its stock. This process forces you to consider the company’s strength and possible vulnerabilities as it competes for market share.

Although it is a logistics company at its core, Amazon competes for market share in several industries, so this step will be more complicated than your average company.

According to Amazon’s quarterly and financial statements, Amazon breaks its revenue streams into five major categories.

Let’s examine each of these categories and identify the company’s main competitors:

#1. Online stores

  • Shopify (SHOP)
  • Walmart (WMT)
  • (OSTK)
  • Alibaba (BABA)

#2. Physical Stores

  • Walmart (WMT)
  • Target (TGT)
  • Costco (COST)

#3. Third-party seller services

  • eBay (EBAY)
  • Facebook (FB)
  • Etsy (ETSY)

#4. Subscription services

#5. Amazon Web Services (AWS)

  • Microsoft (MSFT)
  • Alphabet (GOOG)
  • Alibaba (BABA)
  • Oracle (ORCL)
  • Salesforce (CRM)
  • Snowflake (SNOW)

Amazon Stock Analysis

Looking into a company’s financial statements is also worth your time if you’re deciding whether or not to invest.

Let’s look at the highlights of Amazon’s most recent earnings report:

  • Operating cash flow: decreased 1% year-over-year to $54.7 billion
  • Net sales: increased 15% to $111 billion in the quarter 
  • Net Income: decreased to $3.2 billion in the quarter, down from $6.3 billion in the same quarter last year
  • AWS grew its quarterly revenue 39% year-over-year to $16.1 billion

Amazon executives emphasized the company’s commitments to continue to prioritize the long-term objective over the short-term ones. 

>> More: Join The Motley Fool Stock Advisor & see their top 10 stocks to buy right now. 

Amazon Stock Allocation in Your Portfolio

Finding the right allocation of Amazon stock in your portfolio depends on various factors, such as your investing goals, time horizon and risk tolerance.

These will differ greatly from person to person, so it’s important to organize your investing mental models before pouring your money into a single stock.

Here are some questions to consider:

  • Will Amazon outperform the other tech giants moving forward?
  • Will unfavorable regulation affect Amazon’s ability to grow?
  • Will a post-Bezos Amazon continue to thrive?
  • Can AWS effectively protect market share from Microsoft Azure and Google Cloud?
  • Does Amazon have a favorable competitive landscape?
  • Will Amazon stock outperform the S&P 500 over the next five years?

How to Buy Amazon Stock

Ok, you’ve decided that Amazon belongs in your portfolio. Here’s what you need to do next if you want to buy Amazon Stock:

#1. Open an Account with a Broker

There are countless brokerage firms to choose from, but we recommend opening an account with Vanguard or Charles Schwab.

These are two of the most reputable brokers available and trusted by more than 60 million personal investors.

We recommend investing in a Roth IRA or Traditional IRA before allocating to a brokerage account because of their tax-advantaged characteristics.

#2. Fund Your Account

Next, you need to fund your account by connecting your bank account to your Vanguard or Charles Schwab account. This process is very straightforward and secure.

It may take a few days to verify your banking information and the funds to hit your account, but these are necessary security measures.

#3. Buy Amazon Stock

You can search for Amazon stock by typing in its ticker symbol, “AMZN”, and then decide on the number of shares you wish to purchase.

Depending on the brokerage firm you invest with, you may even be able to buy fractional shares of the e-commerce giant – as little as $1 worth of stock. 

Final Take: Amazon Stock

It’s not an accident that Amazon’s been one of the best-performing stocks of the last decade – the company’s culture of innovation continues to exceed Wall Street’s expectations quarter after quarter.

Past performance does not indicate future returns, but Amazon’s success doesn’t appear to be slowing down any time soon.

More Investing Resources:

This article is for informational purposes only. It is not intended to be investment advice. 

Sean Graytok
Sean Graytok

Sean Graytok is our Co-Founder and is a recognized expert in investing, cryptocurrency, and financial management. His work has been cited in leading industry publications, such as InvestorsPlace and Business Insider. Sean is interested in the people and companies who are driving financial innovation.