Amazon (NASDAQ:AMZN) has emerged as one of investors’ favorite stocks in the technology sector during the coronavirus pandemic. At about $2,400 per share, Amazon stock has risen about 24% over the past month. The S&P 500 has risen about 20% during the same period. Alphabet (NASDAQ:GOOGL) and Facebook (NASDAQ:FB) stocks have jumped about 20% over the past month.
Amazon is important for consumers and businesses during the pandemic. The benefits continue to increase. At the same time, the company has struggled with labor challenges. For example, the company has been hit by warehouse worker strikes and a standoff with labor unions.
Right now, investors want to keep close tabs on their investments. Here are three things Amazon stock investors need to know.
Pandemic sell-off in Amazon stock and the recovery
Amazon stock suffered a big sell-off in the past few months. The US started reporting large coronavirus infection numbers. When the outbreak started in Wuhan in December 2019, it was largely viewed as a “Chinese problem.” Chinese technology giants like Alibaba (NYSE:BABA) and Baidu (NASDAQ:BIDU) warned that their revenues would fall due to the outbreak in China.
However, it didn’t take long before the virus hit the US and most of the world, which sparked a panic sell-off in company shares. US stocks, including Amazon, crashed in March.
So far, Amazon is leading the recovery from the pandemic sell-off. At $2,400, Amazon stock has rebounded about 45% from its pandemic low of $1,676. Investors have been flocking to the stock. They realize that the pandemic has created a huge business opportunity for the company.
The demand for Amazon’s online shopping service has spiked. More people have to stay home due to COVID-19 lockdowns. Amazon’s cloud business could also benefit from the pandemic. Many of Amazon’s cloud customers like Netflix, Zoom, and Slack have seen increased demand for their services. Notably, the cloud division is Amazon’s most profitable business.
Jeff Bezos resumes day-to-day running of Amazon
Jeff Bezos, Amazon’s founder and CEO, is one of the company’s largest shareholders. He owns 12% of Amazon stock, which is worth about $145 billion given the company’s $1.2 trillion valuation. Last year, Bezos transferred part of his stake in Amazon stock to his ex-wife, Mackenzie Bezos, in their divorce settlement.
The pandemic created a boom in online retail and cloud computing markets. Although Amazon is a leader in these markets, it faces fierce competition. Walmart and other retailers have also stepped up their game to lure online shoppers during COVID-19. Therefore, Amazon has to fight hard if it wants to make the most of the current demand. The situation is the same in the cloud market. Microsoft and Google also want to capitalize on the demand amid the pandemic.
Right now is a critical time for Amazon. In recent weeks, Bezos has become more involved in running the company, according to The New York Times. Likewise, Bob Iger has retaken control of Walt Disney after stepping down earlier.
Bezos’s return comes as Amazon stock has soared. In contrast, Disney stock tumbled amid the pandemic. Amazon has been facing several challenges. The company’s warehouse workers have protested. They said that the company didn’t take their safety and health seriously during the pandemic. Notably, the warehouse team is central to Amazon’s retail operation. The company shut its warehouse in France amid a stand-off with unions representing the warehouse workers.
Prime continues to soar
Behind the surge in Amazon stock is a spike in the demand for the Prime membership program. Under the program, Amazon retail customers pay a $119 annual fee to unlock a range of benefits. The benefits include free video entertainment and free cloud storage. The top attraction is the free delivery of Amazon shopping purchases and exclusive discounts on Amazon purchases.
According to Recode, the pandemic has boosted the uptake of Amazon Prime. The company finished 2019 with over 150 million Prime members. Amazon collected more than $19 billion in subscription revenue in 2019. Most of the subscription revenue was from Prime membership fees. The amount jumped from $14 billion in 2018.
The rise in Prime subscription bodes well for Amazon stock. In addition to the fee revenue, Prime members are also the company’s most valuable customers. They spend significantly more money than regular customers on Amazon retail purchases. The retail business is Amazon’s largest revenue source.