Amazon’s (NASDAQ:AMZN) stupefying success is a testament to the company’s ability to constantly innovate and remain relevant in an increasingly competitive industry. In the last 12 months, Amazon stock managed to outperform the markets thanks to the recent surge in e-commerce. This was amplified by the growth of Amazon Web Service (AWS) as remote work became the norm.
After impressive quarterly results, the stock has lagged recently on news of the surprise departure of CEO Jeff Bezos and rising yields. However, with a fundamentally strong business, the dip in prices presents a great buying opportunity for investors.
Here’s why Amazon is a great buy in any environment.
The Reasons To Buy Amazon Stock Are Plentiful
The recent tech sell-off as a result of rising yields has been a drag on Amazon stock. But the fall in prices presents a great buying opportunity for investors. For one, a successful holiday shopping season resulted in a blowout fourth quarter for the company. Net sales increased 44% to $125.6 billion and operating income spiked by 77% to $6.9 billion.
Needless to say, the earnings blew past analyst expectations on all counts. But according to management at Amazon, the company has big gains ahead. Sales for the first quarter of this year are expected to rise between 33% to 40%.
With everything going digital these days, there is good reason to believe that Amazon has a long runway for growth. The coronavirus pandemic accelerated the growth of e-commerce and experts predict this trend will continue long after the pandemic. Shifts in consumer buying habits will remain sticky and will be a boon for Amazon stock in the coming years. Moreover, businesses that are making the permanent shift to digital have a greater incentive to partner with Amazon and grow their online footprint.
Adding to the e-commerce growth is the shift to a remote working environment. In the future, businesses are likely to incorporate remote work to a varying degree. This bodes well for Amazon that offers a broad range of on-demand services for remote workers. In its previous quarter, its cloud platform, Amazon Web Services accounted nearly half of its total operating income. As remote work becomes the norm, this service will be a major growth driver for the company.
Despite any short-term movements in its stock value, Amazon remains a great buy for its strong market position and versatile business model.
Jeff Bezos’ Surprise Departure From Amazon
Twenty-seven years after founding the company, Bezos announced his retirement as CEO. The news came just after Amazon released its best quarterly results to date. Bezos’ departure has many investors worried about the company’s future. However, I firmly believe the tech juggernaut will have continued success for two major reasons.
First, new CEO Andy Jassy is the visionary behind Amazon Web Services. He has also shadowed Bezos since the early days and was put in charge of the company’s CD venture at its inception. So despite Bezos’ departure, it’s safe to say that the company is in well-qualified hands as it continues to disrupt the e-commerce space. Moreover, Bezos will assume the role of executive chairman of the board and will oversee the operations of the business, just not at a day-to-day level.
Second, it’s worth noting that Amazon’s business is thriving. As mentioned earlier, the company reported its best earnings yet and provided guidance for greater growth in the next quarter. According to analysts, there will be a sequential increase in earnings with earnings per share (EPS) going as high as $121.65 by 2024. With incredible growth prospects in both its cloud and e-commerce businesses, Amazon stock is worth holding on to for the long haul.
The Bottom Line
The markets have their periods of volatility, but real investment value comes from holding on to a stock through the ups and downs. Fundamentally speaking, Amazon has never been stronger than it is right now. New leadership at the company creates new opportunities for innovation and growth.
This gives investors plenty of reasons to remain confident in the future of Amazon stock. The recent sell-off makes it the perfect time to pick up a few shares of one of the most cutting-edge tech companies in the world.
On the date of publication, Divya Premkumar did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Divya Premkumar has a finance degree from the University of Houston, Texas. She is a financial writer and analyst who has written stories on various financial topics from investing to personal finance. Divya has been writing for InvestorPlace since 2020.