Is Amazon a Prime Stock to Buy Now?
01 Aug 2019
It’s amazing how far Amazon (NASDAQ: AMZN ) has come from its days selling books in 1998. Today, this e-commerce giant has a hand in just about every aspect of e-commerce.
In 2015, the company celebrated the 20th anniversary of its founding by introducing Prime Day, when Prime members are given access to a variety of discounts, as well as short-lived “lightning deals.”
This year’s Prime Day took place July 15th and 16th, the longest Prime Day to take place since its start.
And clearly, this was the right move. In the most recent Prime Day, company management announced more sales than the previous Black Friday and Cyber Monday combined. In fact, it was the “largest shopping event in Amazon history.” The two-day event also attracted even more customers , since folks had two days to register.
And with more than 175 million items sold, this year’s Prime Day outdid 2018’s performance of 100 million items. Analysts have estimated the total Prime Day sales to be $5.8 billion, up from last year’s total of $4.2 billion.
In Growth Investor , we like to take a broad view on stocks like AMZN. And, again, Prime Day is just a momentary event. So, let’s dig deeper by running AMZN through my Portfolio Grader .
As you can see, AMZN receives a B-rating for both its Fundamental and Quantitative Grade, meaning it continues to see solid buying pressure AND has solid underlying fundamentals to drive the stock higher over time. The total grade of a B makes Amazon a solid Buy.
We saw in Amazon’s second-quarter report on Thursday that its fundamentals remain strong. While earnings of $5.22 per share fell below analysts’ expectations of $5.57 – a 6.3% earnings miss – its sales shined.
Thanks to Amazon’s move to offer one-day delivery to many Prime members, sales accelerated during the second quarter. Total sales jumped 20% year-over-year to $63.4 billion, which topped analysts’ forecasts for $62.5 billion.
Breaking down the sales just a little bit further, it’s clear that the company’s Amazon Web Services (AWS) contributed nicely to its growth. Sales increased 37% to a whopping $8.4 billion. It accounted for about 13% of Amazon’s total revenue for the quarter. And it remains the leader in the cloud computing space, beating out Microsoft’s (NASDAQ: MSFT ) Microsoft Azure and Google’s (NASDAQ: GOOGL ) Google Cloud.
So, looking forward to the third quarter, Amazon expects sales between $66 billion and $70 billion, or 17% to 24% annual sales growth. That’s in line with analysts’ expectations for sales of $67.3 billion.
Protecting Amazon’s Revenue Driver
Since AWS plays such a big role in the company’s growth, and given the increased cybersecurity attacks around the world, it’s more important than ever that AWS be protected.
Amazon is working with a company that has developed a cunning detection system that can analyze past criminal behavior and predict the next attack, using pattern recognition and machine learning – in a word, artificial intelligence (AI) .
Thanks to this company, Amazon will be able to avoid vicious cyberattacks so as to not become the next Equifax – in which 143 million people had their most sensitive information stolen. This kind of protection will fuel the company’s retail dominance.
By Louis Navellier