How to Buy Amazon Stock
Amazon is one of the largest companies in the world and also one of the most well-known. The growth of its share price since the company’s foundation has been phenomenal and still investors flock to the e-commerce heavyweight. With its incredible past success, have investors missed their chance to buy Amazon shares?
In this article, we will take a look at Amazon, analyse its financial performance and its share price. We will also examine the question “should I invest in Amazon?”, demonstrate how to buy Amazon stock and much more!
Table of Contents
Amazon – A Brief History
Amazon was founded by current President and Chairman, Jeff Bezos in 1994. Bezos, who had been working on Wall Street, quit his job to avoid missing out on the internet business boom.
What started out as an online book retailer operating out of Bezos’ garage has evolved into a global e-commerce giant, selling countless products online and spanning various additional industries - including cloud computing, artificial intelligence and digital streaming - as well as owning over 40 subsidiary companies and having significant investments in many others.
Is Amazon a good stock to buy? Later, we will look at the question ‘should I invest in Amazon’, but first, let’s look at their recent financial performance.
Amazon Financial Results
When considering whether or not to invest in Amazon stock, or any company’s stock for that matter, it is important to take a detailed look at the company and its financial results.
For the last decade or so, generating revenue has not been an issue for Amazon. However, converting this revenue into meaningful profit has been, with founder Bezos favouring investing in future growth over beating earnings targets.
This heavy investment has allowed Amazon to grow and dominate several markets, and the profit inevitably began to follow, with 2017 being its breakout year in this regard. Since then, profits have been more reliable and consistent.
However, 2022 has seen this trend reverse, with the e-commerce giant making a total net loss of $5.9 billion in the first six months of the year.
Source: Amazon – Q2 Results 2022
Whilst these numbers may be discouraging to someone considering investing in Amazon shares, it’s worth digging deeper in order to truly understand the headline results.
High inflation has led to Amazon’s input costs rising. In the first half of 2022, Amazon generated $237.7 billion in net sales, an increase of 7.3% year on year (YoY). However, in the same period, operating expenses shot up 12.5% YoY.
More importantly, negative net income this year has been largely due to losses on the company’s stake in Rivian Automotive, whose share price fell more than 75% in the first half of 2022.
Therefore, Amazon’s losses this year have largely been due to external factors rather than poor performance on the part of the company. So, is investing in Amazon a good idea? Let’s take a look at Amazon’s recent performance in the stock market.
Analysis of Amazon Share Price
Amazon’s performance in the stock market has been nothing short of phenomenal since its debut. Before we address the question of ‘should I invest in Amazon’, let’s take a look at the evolution of the Amazon share price over the last five years.
In the lead up to 2020, Amazon shares were following a long-term uptrend, gaining more than 170% in five years.
In 2020, as the Covid-19 pandemic spread around the world, Amazon was one of a number of technology stocks which greatly benefitted from the restrictions in place. The Amazon share price soared more than 76% by the end of the year, but slowed in 2021, only adding a further 2% for the year.
However, so far in 2022, Amazon shares have suffered, caught in the general downturn which has affected many other companies. In the first half of the year, share price fell more than 36%, although has partially recovered since then.
Does this downturn in share price present investors with an opportunity to buy shares in Amazon at a cheaper price?
Trade Amazon Stock CFDs
Do you think that Amazon shares will continue to fall?
With a Trade.MT5 account from Admirals, you can trade Contracts For Difference (CFDs) on Amazon stock and over 3,300 other shares around the world! CFDs allow traders to attempt to profit from both rising and falling prices. Click the banner below to register for an account today:
Should I Invest in Amazon Stock?
In June 2022, Amazon split their stock by a ratio of 20:1, making individual shares of Amazon stock more affordable to new investors. But, more affordable or not, is investing in Amazon a good idea?
We can divide Amazon’s businesses into two main segments: e-commerce (including revenue generated from Amazon Prime), and Amazon Web Services (AWS).
AWS is Amazon’s cloud computing business which dominates this expanding marketplace. In Q2 2022, AWS market share was more than its two closest competitors’ combined, those two competitors being Microsoft’s Azure and Google Cloud.
Whilst e-commerce generates the lion’s share of revenue, accounting for more than 86% of net sales in 2021, its profit margins are notoriously low. In 2021, net sales from online retail generated more than $407 billion, but net income amounted to just $6.3 billion.
By comparison, AWS generates a lot less revenue but this revenue is growing rapidly, and its profit margins are much higher. In 2021, AWS net sales amounted to $62.2 billion and its net income was $18.5 billion. That’s a margin of almost 30% compared to around 1.5% for the e-commerce business.
Understandably, the growth of AWS has been a great attraction to investors. However, they shouldn’t necessarily be put off by the low profit margins of Amazon’s main e-commerce business.
Amazon provides an unrivalled customer service in many ways, luring customers into their ecosystem and trapping them with a number of benefits that keep them coming back for more.
Their Prime membership ensures next day delivery on a wide range of goods, which customers take advantage of by ordering more than they would otherwise. The additional benefits this membership provides, such as Prime Video, help keep their customers roped in.
This combination of a fast growing, highly profitable business in AWS, and a retail operation that provides a unique experience and keeps customers coming back for more, makes investing in Amazon shares an attractive long-term prospect.
However, people considering buying shares in Amazon will need to remain braced for ongoing volatility, as the global economic outlook remains uncertain and high inflation is likely to impact Amazon’s results for the remainder of the year at least.
How to Buy Amazon Stock
If you feel that investing in Amazon stock is the right decision for you, you can buy shares in Amazon with the Invest.MT5 account from Admirals. In order to learn how to buy Amazon stock, follow these steps:
- Open an Invest.MT5 account and log in to the Dashboard
- Next to your account details, click ‘Invest’ to open the MetaTrader Web Trading Platform
- In the Market Watch on the left-hand of the screen, search for Amazon shares and add it to the list of symbols
- Click the symbol and drag it onto the chart to open an Amazon chart
- Click New Order at the top of the screen, enter how many Amazon shares you want to and send your order to the market to buy Amazon shares!
Investing in Amazon FAQ
When Was the Amazon IPO?
Amazon went public on 15 May 1997 at an IPO price of $18.
When Is the Amazon Stock Split?
In its history, Amazon have split their stock on four different occasions. The most recent Amazon stock split was a 20:1 split on 6 June 2022.
How Much Does Amazon Stock Pay in Dividends?
Amazon is not a dividend paying stock and the company has not stated any plans to begin issuing dividends in the future.
Invest in Amazon with Admirals
An Invest.MT5 account from Admirals allows you to invest in Amazon shares, more than 2,500 other stocks and over 300 Exchange-Traded Funds (ETFs) from 15 of the world’s largest stock exchanges!
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