The e-commerce juggernaut has been slowly recovering its share value after seeing sizable losses throughout the year. Is September the best time to hop on the AMZN bandwagon?
Like practically all investors, Amazon Report shareholders have experienced the market’s violent ups and downs in recent years. The e-commerce behemoth's stock skyrocketed in 2020, stayed flat in 2021 (tanking both the S&P 500 and the tech-heavy Nasdaq Composite), and plunged in the first half of 2022.
But there's good news: Amazon's stock does seem promising right now. The market is hopeful the company will announce double-digit growth in its third-quarter earnings report.
However, as the past two years have taught us, holding AMZN isn't always a peaceful ride into the sunset. It's more like a roller coaster.
Amazon's Most Recent Quarter
In the second quarter, Amazon delivered surprisingly positive results. The company beat the market’s revenue expectations for the quarter by $2 billion, reaching $121 billion in sales.
Back then, Amazon Web Services (AWS) was the star of the show. The cloud-computing business generated nearly $20 billion in revenue, of which $5.7 billion was operating profit.
The AWS segment appears to be headwind-proof, as it’s been keeping its double-digit growth record intact even throughout 2022. AWS grew 37% and 33% in the first and second quarters, respectively.
On the other hand, e-commerce is a mystery. The macroeconomic scenario has made the market bearish about the future of online retail.
But some opinions might have changed after Amazon reported record sales during its Prime Day and that its North America segment had produced 10% growth.
Could the e-commerce industry be accelerating again?
Plans for the Long-Term
I believe Amazon is the kind of stock that suits investors looking for a long-term commitment, rather than a quick relationship. The company has been depleting its free cash flow in order to make sizable acquisitions.
Within less than a month, Amazon announced it will add to its portfolio both One Medical (ONEM) - Get 1Life Healthcare Inc. Report and iRobot (IRBT) - Get iRobot Corporation Report. Amazon expects to spend $5.6 billion on both deals.
Amazon's cash-flow sacrifice indicates that management has a long-term vision for the company. Once the company leaders are able to deliver on their visions (e.g., enhancing Amazon’s presence in the healthcare industry), Amazon's shares could start soaring soon.
What Are the Risks of Investing in Amazon?
We must acknowledge that Amazon's stock — like the entire equity market — is a risky investment. It's important to understand that macroeconomic headwinds such as inflation, supply-chain constraints, and oil-supply shortages might not die down until the end of 2022.
That said, AMZN appears poised to thrive once these dark days are over.
In fact, Wall Street is considerably bullish on the stock. Of the 31 experts covering it on TipRanks, 30 have a "buy" recommendation. (The one left rates it as a “hold.”) And Amazon’s average price target is $175, implying 36% upside.
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