Amazon (AMZN) Stock: This Needs To Be In Your Portfolio

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Amazon.com, Inc. (NASDAQ: AMZN)

Ah Amazon. The company is absolutely incredible. However, if you look back to late 2014, you’ll notice a major shift in the overall opinion associated with the stock. While the bulls are out to play at the moment, back then, the bears were controlling the stock in a big way. Today, we’ll talk about why AMZN wasn’t doing too well in late 2014, what caused the overall opinion to shift since, and what we can expect to see from the stock moving forward.

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Why AMZN Wasn’t Doing Well In Late 2014

The Reality is that, by nature, Amazon’s business model took quite a while to reach the profits. While the company grew exponentially quickly, it has been focused on incredibly small margins. So, for the first several years, the company was forced to put every bit of money it was actually making back into growth, never bringing home a profit.

The fact that AMZN wasn’t profitable was already concerning to consumers. However, in late 2015, we started to see big moves from the company. Jeff Bezos went on a spending spree, spending millions-upon-millions of dollars. The goal was simple – build tons of fulfillment centers to improve shipping times. However, with the company still not making it to the profits, investors started to become increasingly concerned. As a result, toward the end of 2014, the stock started to take a dive.

Why Opinions Changed

While investors were overwhelmingly concerned about AMZN in late 2014, when 2015 rolled around, we saw a change in opinion, and it happened fast. On the first earnings report in the year, Amazon finally reported a profit. It wasn’t a huge profit, but the company had finally made it into the green, proving the bears wrong. As a result, we started to see drastic upward movement on the stock, as well as more and more analysts weighing in.

Why Amazon Will Continue To Grow Exponentially

When I first started to follow AMZN, I have to admit, I was concerned about the company. The reality is that the company focused on incredibly small margins to increase sales volume. However, with incredible amounts of overhead costs associated with excessive amounts of fulfillment centers, it simply didn’t seem like it was ever going to be profitable. Sure, in a perfect world, it would work; however, this world is often far from perfect. Nonetheless, the stars aligned just right for AMZN, and based on what I’ve seen recently, I’m expecting to see more gains. Here are the three biggest reasons that I’m expecting to see continued growth out of Amazon:

  • Prime – At first glance, Amazon Prime seems like a losing venture. For $99 per year, consumers get free 2-day shipping on most orders, streaming video, and much more. I know with the amount I order, AMZN is losing on the shipping on my account. However, they don’t care. The truth is that Prime members spend a massive amount of money at Amazon. In fact, the majority of prime members are spending $800 or more per year at AMZN, and I’ll be the first to admit, I spend far more. So, while Prime service costs may end in a loss, the gains the company realizes from sales among prime members makes this service a big hit!
  • AWS – When it comes to cloud computing, Amazon Web Services is still relatively new. Nonetheless, the company has done incredibly well with this service, pushing it to become worth billions in a very short period of time. Even tech industry leaders, like Salesforce.com, are using AWS for their cloud computing needs. This will continue to drive money into AMZN.
  • Fresh – Finally, Amazon is working on a new concept as we speak. The concept is known as Amazon Prime Fresh. With this service, Prime members have the ability to order perishable goods, everything from veggies to milk, meat, cookies, and more, right from home. This is a service that could give Wal-Mart a run for its money. While it’s only available in limited areas at the moment, I believe that this is going to be another big hit from AMZN.

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What Do You Think?

Where do you think AMZN is headed moving forward and why? Let us know your opinion in the comments below!

[Image Courtesy of Flickr]

1 COMMENT

  1. Jeff Bezos is an animal … he just won’t be denied in his quest to build one of the 21st century’s most successful companies!

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