One of the largest and most well-known corporations in the world today is Amazon, the online retailer. During the epidemic, Amazon’s value and popularity surged as the closure of physical establishments worldwide forced individuals to make purchases online. Amazon now sells over $100 billion worth of merchandise every quarter; it all started as an online bookstore outside of Seattle, Washington, in 1994. You can use your Amazon account to buy almost anything these days. Because of this, their stock price has risen substantially over the last several years. This article covers everything you need to know to invest in Amazon stock, including how to purchase your own shares.
The price of the stock is high
To begin, keep in mind that Amazon stock is quite pricey. Quite pricey, I should add. As of this article’s publishing, the price of one share of Amazon stock was around $3,600 USD. That’s a lot of cash, particularly when contrasted with eBay, a competing online shop, where a single share costs $70. The share price of Tesla, another popular stock in the past several years, is approximately $650. You should be prepared to part with a sizable sum of money if you wish to purchase many shares of Amazon.
The enormous size, general success, and popularity of Amazon are all factors in the high stock price. The stock price of the company has soared as a result of its rapid growth and increasing popularity. The company’s stock price has soared. The price of one share of Amazon stock was $745 five years ago. Although it’s still pricey, it’s a significant reduction compared to today. After all, how much will it be worth in another five years?
Astonishing Profits
It wasn’t until 1997 that Amazon’s stock debuted on the NASDAQ market. Investors could purchase the stock for $1.73 at that time. In the time after, the stock price increased by more than 200,000%, reaching its present level. Two hundred thousand percent is not an error; it is the correct number. In just twenty-five years, that’s an incredible return.
If an investor had put $100 into Amazon shares following the company’s IPO in 1997, they would now have about $150,000. Your retirement plan is sound. The company’s growth throughout the years has resulted in numerous dividend payments to shareholders. In the long term, will Amazon be able to keep giving investors such high returns? Even though it’s impossible to know what the future holds, they’ve been successful thus far.
Is there going to be a stock split?
Companies often divide their shares when their price becomes too high. Doing so makes investing more cheap by lowering the price per share. Take Apple as an example; in 2020, they split their stock four ways to one. For every share they already owned, investors received four additional shares, each valued at 25% of the original. No one’s value diminishes in a stock split, but the reduced price may attract more investors.
During the years 1998 and 1999, Amazon quickly implemented three separate stock splits. But it’s been over 20 years since the last stock split at this corporation. Despite the astronomically high share price and numerous requests, they have remained steadfast in their refusal to implement another stock split. No stock split is in the near future; therefore, investors should act quickly.
Elimination of Dividends
Dividends are periodic payments provided to shareholders, typically once a year or every three months. A common way for publicly listed corporations to show appreciation to their shareholders is through dividend payments. For instance, in the event that the company maintains its current rate of development and performance, it may propose to pay investors $2 per share once a year or $0.50 per share every quarter.
Dividends provide a steady stream of income for many investors in their golden years. Still, Amazon isn’t paying dividends, so investors seeking such payments should seek elsewhere. However, the firm maintains that it increases its share price and operational strength by reinvesting its profits. Increasing the value of your shares is supposed to be one way the corporation compensates shareholders.
Congress is conducting an examination
Lawmakers in Washington, D.C., have been more and more scrutinizing Amazon as it has expanded and taken over the online retail sector. The corporation is now under scrutiny from certain lawmakers who claim it has a monopoly. They have gone as far as threatening to disband the corporation, using the 2001 Microsoft bankruptcy as an example.
This congressional scrutiny is something that potential investors should be mindful of. Speculative gains in Amazon stock could take a hit as a result. A number of congressional committees have summoned Amazon CEO Jeff Bezos and other internet company heads, like Apple and Facebook’s Mark Zuckerberg, to testify within the last year.
Leadership Transition
Bezos, who transformed the company from a little bookstore into the behemoth it is today, has recently resigned as CEO, which is another crucial fact for investors to keep in mind. He will still be involved with Amazon in a limited capacity, but he will no longer be responsible for running the business on a daily basis.
After Bezos’s net worth surpassed $200 billion, Andrew Jassy, a businessman and long-time executive at Amazon, took over as CEO. Jassy is currently the wealthiest person in the world. With a degree from Harvard, the new CEO was previously the head of Amazon Web Services (AWS). Is Jassy capable of pushing Amazon to its limits? How much longer we wait is anybody’s guess.
Different Companies
Nowadays, Amazon is more than simply an online bookstore. You may have noticed that the site now sells practically anything imaginable. When it comes to revenue, Amazon has diversified even further than that business model. Amazon actually owns a plethora of non-e-commerce companies, which may come as a surprise to you.
Among the most prominent grocery chains in North America, Amazon owns Whole Foods. In addition, they run Amazon Prime, a streaming service that competes with Netflix and Disney+. Another option for business solutions is cloud computing and online storage, such as the aforementioned AWS. Additionally, they produce and market a range of smart speakers that include a virtual assistant called Alexa. Online retail is still Amazon’s largest and most lucrative business area, but it’s far from the only source of income for the company.
Emerging Technology
Along with its varied business interests, Amazon is also dabbling in several innovative technologies, such as self-driving cars and delivery drones. Being an industry pioneer is something the company relishes. Who knows what Amazon will introduce next?
To be sure, not every innovation from Amazon has been a smashing success. Unveiled in 2014, the now-infamous Amazon Fire smartphone was actually one of the biggest product failures ever. Due to the smartphone’s dismal reception, the manufacturer has refrained from returning to the smartphone industry.
Availability of stock
With over 500 million shares in circulation, Amazon stock is among the most extensively owned in the world. This bodes well for the stock’s buyability, sellability, and liquidity. The stock trades under the symbol “AMZN” and is available to investors through the majority of retail and online brokerages.
Rarely does the corporation engage in stock repurchases, a strategy to increase stock value by reducing the number of outstanding shares. Investors can rest assured that Amazon stock is always readily available. If it’s within their budget, that is.
Activist investors are focusing on them
Activist shareholders often aim their sights at Amazon due to the company’s size, influence, and well-known brand. Proposals to alter the corporate form and governance of the corporation are commonplace among their works. Investors should be aware of this, even if it almost never works.
Some of the changes advocated for by activist investors include reducing the company’s lobbying efforts in Washington, increasing environmental sustainability, and unionizing the company’s employees. Amazon typically finds these proposals frustrating. In the end, they nearly invariably fail to pass.
Caution: Never put money you can’t afford to lose into the stock market. Unpredictability reigns in the market.
The Final Analysis
If past performance is any indicator, Amazon is an excellent long-term investment. Investors may be disappointed that Amazon does not offer dividend payments or share repurchases, but they cannot deny the stock’s remarkable return on investment (ROI) over the years.
Amazon stock is among the best-performing equities ever, with gains of almost 200,000% since its initial public offering (IPO) in 1997. It is currently difficult to wager against Amazon continuing its remarkable climb, even if no one can forecast the future of the stock market. Investing in Amazon is a good idea for anyone seeking a stable stock that can generate earnings for a long time. The high initial investment may prove to be worthwhile in the long run.
