Amazon.com’s stock price has pulled back a little from its recent peak. On July 17, Amazon shares closed at $2,962, which left them 11 percent below their all-time high of $3,344. The pullback in Amazon’s stock price creates an opportunity for investors who missed the previous rally to get on board at a discount before the next rally.
Wall Street thinks that you should be buying Amazon shares. Currently, 92 percent of the analysts covering the stock recommend a buy, 2 percent recommend a hold, and 2 percent recommend a sell. Amazon stock has a consensus buy rating.
Amazon’s stock price has risen 60 percent this year
Amazon’s stock price has gained 60 percent in 2020. In comparison, the S&P 500 Index has fallen 0.19 percent this year. Amazon stock tops the FAANG group chart. Netflix has gained 52 percent this year, while Apple has gained 31 percent. So far, Facebook and Alphabet have gained 18 percent and 13 percent this year, respectively.
Amazon’s stock price has soared amid the boom in its e-commerce and cloud computing businesses due to the COVID-19 pandemic. More households have turned to shopping online during the coronavirus pandemic. The trend has boosted sales in Amazon’s e-commerce division, which contributes the bulk of its revenue. Due to the surge in online shopping, Amazon has expanded its warehouse and delivery capacities. The company delayed its annual Prime Day shopping event this year in order to cope with the demand amid the COVID-19 pandemic.
The demand for cloud services has spiked amid COVID-19, which boosts the sales in Amazon’s cloud division. Cloud business contributes to most of Amazon’s profit. For example, the cloud business was responsible for nearly 80 percent of Amazon’s operating profit in the first quarter. The company’s stock price has jumped 20 percent since its first-quarter results. The increase shows a 33 percent year-over-year rise in the cloud revenue. Amazon controls a third of the global cloud market share, which makes it the largest cloud company.
Since the cloud business is so important to Amazon, it will not go down without fighting for the Pentagon’s JEDI cloud contract. The Pentagon awarded the lucrative JEDI cloud contract to Microsoft, which upset Amazon. Amazon claims that President Trump influenced the Pentagon’s decision. Currently, the matter is in court. President Trump and Amazon CEO Jeff Bezos are not friends.
Warren Buffett’s tech stocks
Investors who scooped up Amazon stock at its COVID-19 pandemic lows in March are looking at returns of more than 80 percent. Even investors getting on board right now could see huge returns. Needham sees Amazon’s stock price hitting $5,000 long term, which implies nearly 70 percent upside from the current price.
Usually, Warren Buffett has shunned technology stocks. However, Amazon is one of the few tech stocks in Buffett’s portfolio. Apple is the other notable technology stock in his portfolio.
Finally, Amazon will likely report its second-quarter earnings on July 30. In April, the company told investors that it would reinvest nearly $4 billion in profit it expected in the quarter.