Amazon.com, Inc. (NASDAQ:AMZN) is a multi-tentacled beast. The company, which started life as a straightforward e-commerce company has now extended its reach into the cloud, consumer electronics, digital content and videos, physical retail stores and so the list continues. Now with its recent $13.7B acquisition of Whole Food Markets, Amazon has broken into the grocery industry in a big way. The scary part- for competitors- is that where Amazon goes it usually succeeds and with devastating effect.
Its success is reflected in the stock price- up to $968 from $728 1-year ago and just $225 5-years ago. Some investors are afraid of this rise and call the stock too expensive. We think they are not considering the positive catalysts that can continue to move the stock ever-higher. So why buy Amazon now? Here are five reasons to snap up the stock now before its share price climbs to dizzying new heights- potentially even reaching $2,000 in 2019.
- Core Strength – At its center, Amazon has a very strong core business. This means its e-commerce business and its very lucrative cloud business aka Amazon Web Services (AWS) that is basically the foundation of a large chunk of the Internet. AMZN has 33% of the $395B e-commerce market, while in terms of AWS, Synergy Research says that Amazon holds over 40% of the cloud market. In 2016, AWS grew by 55% bringing in a whopping revenue of $12.2B. And the fact that Amazon customer satisfaction continues to well outperform the average suggests that these figures will only keep growing.
- Amazon Prime – Amazon’s very successful subscription service Amazon Prime is constantly growing stronger. Not only does Amazon Prime include video and music streaming, but it also includes free one-day delivery- and all for roughly the same price as a Netflix subscription. The best part is that Amazon is taking its delivery methods to the next level with its own planes, trucks, and trial drones. At the same time, Amazon has been quietly expanding into the trillion-dollar freight industry with shipments from China to the US- which should make companies like UBS and FedEx very nervous indeed.
- Echo and Alexa – Amazon has a big advantage here as it was the first to launch its smart home assistant all the way back in 2014. The Echo is powered by an AI bot named Alexa- a voice-powered virtual assistant. And cloud-based Alexa is always getting smarter because she can learn and improve her reactions in response to your preferences, speech patterns and vocabulary. As rival products like Apple’s Siri and Google Home try and keep up, Amazon is now moving on to the exciting new screen-based Echo Show which incorporates visual cues including live video chat. CNBC called the Echo Show “the best smart home assistant you can buy” while Digitimes predicts Amazon will sell over 10 million Echo speakers this year.
- Risk Taking Strategy – one of the best parts about Amazon is that it is not afraid to take a risk. This is why the company is so busy innovating, expanding and entering new markets both geographically and categorically. Aside from its recent entry into book retail and the grocery market, the next big move Amazon may well make is with Amazon Pharmacy. If AMZN is able to work with the strict regulation that the pharmacy business entails then it could potentially make $25B to $50B from this new venture. According to CNBC, Amazon is looking to hire a general manager within the year to head its pharmaceutical team and formulate a strategy.
- Jeff Bezos – none of this would be possible without the man himself- Amazon CEO Jeff Bezos who is now worth over $84 billion according to Forbes. The Amazon founder is an incredibly talented CEO who has won acclaim from the industry as well as from the world’s most famous fund manager- Warren Buffett, who called Bezos “the most remarkable business person of our age.” In reference to Amazon’s leadership position in both the cloud and online retail, Buffett says he was “impressed” by Bezos as: “I’ve never seen a guy succeed in two businesses almost simultaneously that are really quite divergent in terms of customers and all the operations.”
What is the Street saying?
The Street is also very bullish on the e-commerce giant. The stock has a strong buy analyst consensus rating on TipRanks. This breaks down into 26 buy ratings and just 3 hold ratings published on AMZN over the last three months. Meanwhile the average analyst price target of $1,128 now stands at a 15% upside from the current share price of $977.54.