Amazon stock on the rise: Is the King of eCommerce a good buy?
Amazon stock is on the rise but will online retail momentum continue or will eCommerce stall?
Online retail is slowing in a post-pandemic environment, as consumer habits return, albeit slowly, to traditional storefronts and Direct-To-Consumer businesses. This, in turn, has made traders readjust their outlook for Amazon and other online retailers.
This week, we take a look at Amazon and find out whether the King of eCommerce will retain its throne. We also share advice for all traders on how to take advantage of price movements.
Amazon stock – Great week on the market
Amazon saw a great end to August 21 with its share price increasing from $3211 on August 23 to a high of $3333 by August 27, a 4% increase. At the time of writing its share price had increased to $3349.
It should be noted that Amazon’s share price has been steadily dropping from a high of $3731 in July 2021.
Incredible Growth Potential
Amazon’s earnings may not have met investor expectations, but this ignores its performance in a pandemic-hit market rife with uncertainty. Its sales were up 38% in 2020 and they’re expected to be up 23% in 2021. Its net income was up 123%. Incredible numbers for a company of its immense size.
The eCommerce giant is also heavily investing in growth; in 2021 it’s expected to invest $140 billion, up from $101 billion last year. A good example of its growth is the increase of Amazon Web Service, bringing in billions for the brand and expected to increase by 23% in sales growth.
Buy-now-pay-later on Amazon
Amazon is set to give consumers more payment options as it partners with Affirm (AFRM); The goal is to allow customers to split their purchases into 3 or 4 monthly installments. With its latest venture, Amazon follows the likes of PayPal and Apple who have all entered the buy-now-pay-later space. The ongoing pandemic has changed spending behavior and Amazon hopes to garner more market share by proving alternate payment methods.
Affirm’s shares rocketed by 40% following the announcement.
The eCommerce outlier – sales to stall?
Amazon continues to be the titan of online shopping and its 2020 results prove how popular the brand is. Predictions on its performance for 2021 were never going to be 100% given how the pandemic affected the global economy. Projections have had to be scaled back despite Amazon’s superb Q2 results. Although online shopping will continue to grow, the company stated in its 2021 results that it would be focusing on services and experiences.
As the world returns to pre-pandemic normalcy, the retail market share will return to traditional storefronts, albeit slowly. Another big disrupter to Amazon and the entire retail space is the boom of D2C marketing as increasingly more businesses push to cut out the “middleman” and engage with consumers directly.
The US has been hard-pressed to combat its escalating COVID crisis while keeping its economy afloat through economic stimulus packages. This has created a ticking timebomb of inflation set to hit consumers hard in the tailend of 2021. Already the possibility of a sharp increase in consumer prices has made many analysts and companies worried.
So, should you buy Amazon shares?
Buying into one of the world’s greatest companies, at highly attractive valuations, is not only prudent but could prove highly lucrative if you can coincide with your investment during the Earnings Season. Amazon is here to stay but how well it will weather the storm of a changing global economy and high US Dollar inflation remains to be seen.