Amazon (NASDAQ:AMZN) singlehandedly redefined the entire retail landscape. And those who missed out on buying Amazon stock when shares collapsed late last year are feeling pangs of regret. Currently, AMZN is back at its record-busting level, just a few dollars short of $2,000.
Despite knowing how amazing the e-commerce behemoth is, I can understand a prospective buyer’s hesitation. With AMZN stock again at a key psychological level, it’s natural to question how much upside remains. After all, no company, not even Amazon, is immune to correction. Plus, shares already failed at $2,000 almost one year ago.
On the flipside, Amazon stock has demonstrated incredible accelerative prowess. I remember when shares first hit $1,000, a target InvestorPlace feature writer James Brumley rightly called a “completely arbitrary” level. He advised readers to watch for the pendulum to swing the other direction due to psychological reasons.
With the benefit of hindsight, we can say Brumley was right. But you would have also been correct to continue holding onto AMZN stock through the brief respite. That’s because within a few months, shares decisively broke past $1,000 again, never to look back.
Just a little over a year after Amazon stock hit four digits, it briefly exceeded $2,000. That’s the kind of explosive momentum you get with this equity. But will history repeat itself?
Here are three reasons why you can trust AMZN stock for the long haul:
Amazon Prime Day Is Practically a National Holiday
Any sales event that AMZN puts out is virtually guaranteed to be huge. That said, the summer event known as Amazon Prime Day has veritably become a national holiday. And this reason alone is enough to justify exposure to Amazon stock, even at these elevated levels.
Although the retailing giant and tech firm didn’t break out specifics for its most recent Prime Day, it was gargantuan. According to a report from CNN, management did disclose that it was their biggest shopping event ever. More impressively, they said that the event’s total revenue tally exceeded the company’s Black Friday and Cyber Monday sales combined.
To put this into further perspective, analysts estimate that AMZN rang up $6 billion during Prime Day. That’s very close to the entire retail industry’s $6.22 billion Black Friday sales haul via online channels.
Thus, not only has Amazon created a shopping holiday, it has also disrupted the industry again, stealing valuable market share. And with such a powerful weapon they can deploy annually, I don’t see where Amazon stock can go wrong.
Fundamentals Justify the Amazon Stock Premium
And why is AMZN stock so dominant in the investment marketplace? Because Amazon is one of those rare companies where the growth narrative consistently justifies the rising share price.
Perhaps a little known or appreciated fact is that since at least the fourth quarter of 2007, Amazon has never failed to deliver double-digit sales growth on a year-over-year basis. That’s a profoundly remarkable feat, and it’s likely to be this way for some time.
Since Q4 2007, the average YoY growth rate is 29%. Since Q1 2016, that average growth has held at the same rate.
Typically, growth companies cease being as such because their substantially increased size makes it difficult to grow any further. I believe most folks refer to this condition as the “law of large numbers.”
But whatever you want to call it, one thing is clear: it’s crazy difficult to remain relevant for so long, especially in the broader tech industry.
Yet that’s exactly what Amazon is doing. Therefore, I wouldn’t focus too intensely on the Amazon stock price: as long as the growth engine remains (see first point), AMZN will tag along for the ride.
AMZN Is Always Hungry
If I had to guess what Amazon’s secret sauce is, I’d say its their drive. From my perspective, they’re always attacking opportunities as if it’s their last shot. Too many companies (and people, for that matter) give into complacency when they achieve a certain level of success.
In sharp contrast, Amazon takes the opposite route: the more successful they become, the hungrier they get. It’s such a refreshing strategy. More importantly, this hunger represents the intangible element that breeds trust in AMZN stock.
For instance, Amazon is diving into the advertising space. Of course, that puts it square against advertising giants like Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) and Facebook (NASDAQ:FB). Yet Amazon is performing admirably, taking market share from the alpha dogs.
This hunger also leads to the fact that Amazon stock isn’t just a retail investment: it offers exposure to cloud computing, data centers, courier services, even groceries. Not only that, they’re incredibly competent in their key endeavors. And that really drives confidence for AMZN stock over the long-term picture.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.
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