How to Invest in Amazon? Should You Buy Amazon Stock?

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Did you know Amazon (NASDAQ: AMZN) delivered an annualized return of over 30% since its IPO in 1997? It had delivered generous returns in the last five years as well. For instance, if you had stayed invested in Amazon starting from Sep 2016 through January 2023, you would have earned a return on investment of 291.3%. Amazon is one of the most sought-after stocks on the New York Stock Exchange. It is a dream stock to hold for many people across the world. Though the stock has had several disappointing years in its stock market journey, it quickly bounced back to bring a smile to the faces of its shareholders. We, Traders Union, put together this guide to explain everything related to the stock, Amazon. Grab a cup of coffee and read through this amazing piece to know more about Amazon, the reasons to buy its stock, and the risks involved in holding it for the short term.

What is Amazon (AMZN) Company?

Amazon is one of the largest e-commerce companies in the world. It had revolutionized the way people purchase household goods including, electronics, appliances, apparel, groceries, personal care items, jewelry, watches, and baby products. Amazon’s journey was started as an online bookstore in 1994. Founded by Jeff Bezos, Amazon is now into several business verticals besides e-commerce.

The major verticals or product lines of Amazon are:

  • Could computing

  • E-commerce

  • Artificial Intelligence

  • Digital Distribution

  • Entertainment

  • Consumer Electronics

  • Self-Driving Cars

Andy Jessy was appointed as CEO of Amazon on July 5, 2023. As of 2023, Amazon is named among the Big Five Companies of information technology in the United States, along with Facebook, Google, Microsoft, and Apple.

Amazon is widely known for its disruption in the market. Amazon disrupted several industries through its technological innovation. For example, most physical stores are finding it very difficult to survive in the market because of the revolution that Amazon brought through technological innovation on a mass scale.

Amazon is the second-largest employer in the United States. It also enjoys the highest global brand reputation, along with other companies like Apple and Microsoft. Today, its products like Amazon Fresh, Amazon Prime, Kindle, Amazon Drive, Amazon Web Series, Amazon Studios, and Amazon Academy are gaining huge traction in the market.

Amazon evolved much stronger during the COVID-19 pandemic by streamlining its supply chain activities and ensuring that there wasn’t any disruption in delivering groceries and household items. Amazon claims that it had increased the in-house delivery capacity by 50% during the COVID-19 pandemic. Amazon has 40 subsidiaries worldwide. A few well-known among them are IMDb, Shophop, Twitch, Diapers.com, and Amazon Robotics.

Top facts about Amazon for 2024

Amazon has 3 billion active users worldwide

Over 200 million users have an Amazon Prime account, as of January 2023

2/3rd Americans have Prime account on Amazon

Amazon website receives over 213 million unique American visitors every month

The number of third-party sellers on Amazon was 2.5 million in 2023

Amazon’s share in the U.S e-commerce market is around 45% in 2023

Amazon is the second stock to reach $1 trillion market capitalization, after Apple Inc.

Amazon is one of the top five companies in the world, by market capitalization

Amazon spends 35% of its revenue on advertising

Jeff Bezos, the founder of Amazon, is one of the top three wealthiest people in the world

Amazon does not deliver products in Cuba, Iran, North Korea, Sudan, and Syria

Amazon has over 1 million employees in 2023

The median salary of an Amazon employee is $29,007

Over 75 million products are sold on Amazon worldwide

Amazon Stock Profile

Title Amazon

Index

Dow Jones Industrial Average (DJIA) and Standards & Poor’s 500

Stock ticker

AMZN

Price*

$3,206.2 (October 4, 2023)

Market cap

$1.66 Trillion

Current P/E ratio

55.61

Dividend yield

Amazon does not pay dividends

Earnings growth this year (EPS)

120.8% increase year-over-year (12 months ending June 30, 2023)

Expected EPS Growth in 2023

26.94% (January 2023)

Top 5 Reasons to Buy Amazon Stock in 2024

There are several reasons for buying Amazon stock and keeping it in your portfolio in 2023.

International Market Expansion

International markets of Amazon are at an inflection point. The international sales of Amazon in the first quarter of 2023 were increased by 35.5%, driven by the surge in online shopping in developing and underdeveloped countries. Today, Amazon has operations in 58 countries. Amazon gives equal preference to both vertical and horizontal integration. Jeff Bezos has always been eager to bring promising companies under the umbrella of Amazon. It has acquired around 108 companies since its inception. In 2023, Amazon brought companies like Umbra 3D, DBBest, Metro-Goldwyn Mayer, Art19, and Wickr. The acquisitions would continue to help Amazon expand its reach in the international area.

Valuation Discount

Amazon stock has been trading at a 12-month forward PE multiple of 84x, 80x, and 104x in the last one year, three years, and five years respectively. Today, the 12-month forward PE of Amazon is 55.61x. These statistics indicate that the stock is relatively cheaper now when compared to the past. Though the PE of 55x looks expensive from the outside, the historical valuations indicate that the Amazon stock is available at a massive valuation discount today.

Valuation discount

Valuation discount

Macroeconomic Tailwinds

COVID-19 has developed a shift in the habits of people when it comes to shopping. Today, people prefer to shop online than to visit brick-and-mortar shops. This shift in habits is going to stay here and help e-commerce companies like Amazon to increase market share internationally and revenues.

Dominant Product Lines like AWS and Amazon Prime

Today, AWS, the subdivision of Amazon, is dominating the cloud computing space worldwide. Most large-scale companies like Netflix and Zoom are using Amazon’s AWS solutions to offer a seamless experience to their customers. Amazon AWS has around 45% market share in the cloud computing space, closely followed by Microsoft Azure with 29%.

Amazon has a moat (competitive advantage) in the form of Prime, which facilitates on-demand video streaming and free shipping of products. Amazon has been cross-selling a wide range of services to its 200 million Prime customers. The steady increase in the number of subscriptions would help Amazon to further strengthen its base in both e-commerce and video-on-demand over-the-top streaming services.

Consolidation Stage

Amazon stock has been in the stage of consolidation for the last 12 months. For instance, The share price of Amazon has grown 0% from Oct 4, 2020, through Oct 3, 2023, whilst S&P 500 index has delivered a whopping 26% return during the same period. Amazon has historically delivered huge returns after the consolidation phase. If historical trends are anything to go by, we may see a couple of strong years for Amazon in the medium-term.

Amazon Stock Price

Amazon Stock Price

Amazon Stock Forecast

Jefferies: Jeffries assigned a price target of $4200 for Amazon. The bank has termed Amazon a Franchise Pick, which according to the analysts of Jefferies is a high conviction stock. Jefferies also sees a 70% upside potential for Amazon over the next three years.

JP Morgan: JP Morgan, one of the largest investment banks has assigned a price target of $4100 for Amazon. This investment bank maintained overweight on Amazon and reduced the target price from $4600 to $4100 quoting the increasing wages as a reason. This still indicates about a 30% gain from the current levels in the next 12 months.

According to CNN, a 12-month forecast of 45 analysts for Amazon has a median target of $4015, a low of $3775, and a high of $5000. If we go with the median estimate, Amazon may deliver a 28% return in the next 12 months.

Where to Buy Amazon (AMZN) Stock

Amazon’s shares are traded on NASDAQ with the stock ticker AMZN. To purchase Amazon’s shares, the investor needs to have a brokerage account. In 2023, over 3000 stockbrokers in the United States offer stock trading services. Investors should choose a reliable, safe, and commission-free stockbroker for a seamless investing journey. Traders Union (TU) recommends investors use Webull for commission-free investments in stocks.

Webull

Webull is one of the largest discount stockbrokers in the United States. It offers commission-free investments in various assets including stocks, indices, ETFs, commodities, forex, cryptocurrencies, and metals. The features like free real-time quotes, zero commission, $0 minimum deposit have been helping Webull to stay ahead of the competition.

Webull is a highly reliable and safe trading platform because it is regulated by The U.S. Securities and Exchange Commission (SEC) and the Financial Conduct Authority (UK), and The Financial Industry Regulatory Authority (FINRA). Though Webull does not charge any fees on investments, the investors may need to still pay regulatory charges for each trade they make.

Webull also facilitates the trading of stocks, ETFs, options, Forex, and cryptocurrencies. Webull does not charge any commission on options trading (most of Webull’s competitors charge a fee of $0,65 per trade on options). The margin interest rates of Webull are competitive in the industry. Its margin lending rates start at 3.99% and go as high as 6.99%.

Webull won several awards and accolades in the last few years. For instance, Webull was named the best mobile trading platform in the Benzinga Global Fintech Awards. Webull claims that its platform supports extended trading hours which include pre-market (4:00 AM - 9:30 AM ET) and post-market (4:00 PM - 8:00 PM ET). Webull is also preferred by long-term investors because of its retirement accounts like Webull Trading and IRA.

How to Invest in Amazon (AMZN) in 4 steps

This section offers a detailed overview of how an individual can invest in Amazon in 4 steps. We took the commission-free stockbroker, Webull, to showcase the process.

Step-1: Register with a Trading Platform

To purchase shares of a company, the investor should have a brokerage account. Many brokers, including Webull, help you get a brokerage account without much effort. If you want to use Webull, you should use your email and phone number to sign-up on Webull’s trading platform. Webull may ask for additional documents to verify your identity before approving the account.

How to Open Account on Webull

How to Open Account on Webull

Step-2: Transfer Funds by Linking your Bank Account

Webull accepts the deposits through ACH and wire transfer. You may need to deposit funds to become eligible to purchase stocks. Another advantage with Webull is that it offers two promo stocks after the user registers with its trading platform and makes the initial deposit.

Step-3: Create a Watchlist

Upon depositing the amount, the investor should create a watchlist of stocks he or she wants to invest money in. To invest in Amazon, add Amazon’s stock to the watchlist. If you are using Webull, you can add Amazon by searching its ticker name, AMZN, in the search column that appears on the upper right corner of the window. You need to click the star symbol that appears beside the Amazon stock name to add it to the watchlist.

Watchlist on Webull

Watchlist on Webull

Step-4: Pick Amazon Stock and Purchase Shares

Pick Amazon’s stock from the watchlist to purchase its shares. If you use Webull, you may see a small window opened after clicking Amazon stock from the watchlist. The window comprises several details including call-to-actions (buy and sell), order quantity, and order type (limit, market, stop, stop loss). You need to enter the number of shares of Amazon you want to buy and set the order type as a market order to execute the transaction at the market price.

How Much to Invest in Amazon (AMZN) Stock?

The current trading price of Amazon on NASDAQ is $3,206.058. It means you need to have at least $3207 in your brokerage account to purchase one share of Amazon.

Current trading price of Amazon on NASDAQ

Current trading price of Amazon on NASDAQ

You may need to deposit at least $10,000 to the brokerage account if you want to purchase 3 shares of Amazon. If you don’t have a minimum of $3,206, you may still become a shareholder of Amazon by purchasing fractional shares. Many brokers in the U.S facilitate fractional investments. For instance, Webull rolled out fractional share trading on its mobile trading platform on July 13, 2023.

As a rule of thumb, investors need to diversify the portfolio to avoid the risk of losing everything. The ideal equity investment portfolio comprises 5 to 10 high-quality stocks that sustain market downturns and negative macroeconomic trends. Diversification helps to nullify the risk of an investment account going to zero.

Should You Buy Amazon Stock 2024?

According to Meticulous Research in 2020, the e-commerce market would grow at a CAGR of 22.9% to reach $16,215.6 billion in 2027. An e-commerce giant like Amazon would take the major share of this growth. The increasing internet penetration levels in developing countries like India would also fuel the growth of e-commerce in the world. The leadership of Amazon is very proactive. The leaders like Jeff Bezos have ensured that the organization diversifies into several verticals like cloud computing, artificial intelligence, self-driving cars, and digital distribution. The diversification would help Amazon to survive in the market from unknown major technology disruptions in the future. The robust balance sheet, huge cash reserves, and diversified product basket make Amazon the best stock to pursue in 2023.

Are There Some Risks?

Equity investing is associated with several risks. Investors should analyze the risks before expecting returns from investments they make.

Poor Revenue Growth Rate: The share price follows the revenues of the organization. If revenues don’t meet the Wall Street estimations successively for few quarters, the stock price of the company may see a drawdown. There is no guarantee that the stock price of Amazon would grow at the same rate that it has been growing for the last few years.

Short-term Volatility: Equity is highly volatile in the short term. The stock market can move either direction due to macroeconomic factors like inflation, economic recession, COVID-19 like pandemic situation, and unemployment rate. Historically, macroeconomic factors have caused several drawdowns to Amazon’s stock. For instance, Amazon had seen a drawdown of 34% in December 2018; it took nearly 279 trading sessions for the stock to recover.

Summary

Amazon is the perfect stock to be in your portfolio because of its innovative product pipeline, superior financial stability, and good leadership. With 3 billion active users, Amazon has the potential to cross-sell new services to existing customers. Analysts indicate that the stock has at least 30% growth potential in the short term. The factors such as international expansion initiatives, relatively cheaper valuation, macroeconomic tailwinds, and strong product lines make Amazon a perfect stock for the long-term portfolio. We suggest investors use discount brokers like Webull for investing in stocks.

FAQs

Andy Jessy was appointed as CEO. Does that mean Jeff is no longer associated with Amazon?

No, Jeff Bezos stepped down as Amazon CEO on July 5, 2024. He continues to associate with Amazon as Founder and Executive Chairman.

How many shares does Jeff Bezos have in Amazon?

Jeff Bezos owns 55.5 million shares of Amazon. It comes to around 11.1% of the outstanding shares of the company. As of January 2024, Jeff Bezos is the world’s richest person.

Is Amazon stock fairly valued at a current price of $3,206?

Investors should choose stocks with less P/E ratio. The P/E (TTM) of Amazon is 55.61. We cannot say a stock with a P/E ratio of 56 is fairly valued. However, Amazon can outperform the S&P 500 index through its technological innovation, product diversification, and financial stability. Considering the growth prospects, financial stability, and historical valuations, we can safely say that Amazon is available at a valuation discount.

What should I avoid while investing in stocks?

As an investor, you should avoid two aspects in stock market investing. They are fear and greed. Do not buy or sell shares of any company out of fear and greed. We suggest you carefully evaluate the fundamentals of each company and put in money only after you are convinced about its business, product lines, and financial profile.

Team that worked on the article

Mikhail Vnuchkov
Author at Traders Union

Mikhail Vnuchkov joined Traders Union as an author in 2020. He began his professional career as a journalist-observer at a small online financial publication, where he covered global economic events and discussed their impact on the segment of financial investment, including investor income. With five years of experience in finance, Mikhail joined Traders Union team, where he is in charge of forming the pool of latest news for traders, who trade stocks, cryptocurrencies, Forex instruments and fixed income.

The area of responsibility of Mikhail includes covering the news of currency and stock markets, fact checking, updating and editing the content published on the Traders Union website. He successfully analyzes complex financial issues and explains their meaning in simple and understandable language for ordinary people. Mikhail generates content that provides full contact with the readers.

Mikhail’s motto: Learn something new and share your experience – never stop!

Olga Shendetskaya
Author and editor at Traders Union

Olga Shendetskaya has been a part of the Traders Union team as an author, editor and proofreader since 2017. Since 2020, Shendetskaya has been the assistant chief editor of the website of Traders Union, an international association of traders. She has over 10 years of experience of working with economic and financial texts. In the period of 2017-2020, Olga has worked as a journalist and editor of laftNews news agency, economic and financial news sections. At the moment, Olga is a part of the team of top industry experts involved in creation of educational articles in finance and investment, overseeing their writing and publication on the Traders Union website.

Olga has extensive experience in writing and editing articles about the specifics of working in the Forex market, cryptocurrency market, stock exchanges and also in the segment of financial investment in general. This level of expertise allows Olga to create unique and comprehensive articles, describing complex investment mechanisms in a simple and accessible way for traders of any level.

Olga’s motto: Do well and you’ll be well!