US Stocks

Is Amazon Stock Still a Buy?

Despite Amazon missing analyst estimates, this doesn’t necessarily mean Amazon is doomed.

The e-commerce giant and web services provider Amazon (NASDAQ: AMZN) has been growing rapidly until recently.

This quarter, Amazon announced weak guidance alongside revenue growth that missed analyst expectations. This later sent the stock tumbling, losing billions of dollars of value from their market cap. This scares us, especially because they just got their new CEO Andy Jassy.

So is Amazon still growing?

Amazon’s Growth

Amazon wasn’t always an e-commerce giant, it took quite a while for exponential growth to begin. At the time, Jeff Bezos was running Amazon since he founded the company.

Despite the result of Amazon missing analyst estimates for revenues, their revenues have still increased 27% to $113.1 billion this quarter on a year-over-year basis. So Wall Street may be valuing Amazon wrong, which made the share price slide as a result when estimates were not aligned with reality.

This growth shown by Amazon is impressive. A company of its size that’s still able to grow at double-digit multiples should make shareholders confident regardless of what expectations were held above Amazon’s head.

When you read the financials of Amazon, you’ll often find that they are still growing, it’s just the acceleration of growth is slowing. This isn’t necessarily a bad thing, it just shows signs of maturity. When companies mature, they have historically begun introductions of dividends, although this may not be in Amazon’s list of to-do’s for a while.

Avenues of Growth

Despite overall revenue growth slowing, Amazon Web Services, a side business of Amazon, is still growing rapidly. Amazon’s new CEO led AWS to its glory. Which if you ask me, this is a sign that Amazon may be still just as successful without Bezos conducting the operations.

AWS is essentially a data-infused platform to support advertising and marketing, education, energy, financial services, gaming, government, and more.

The solutions seem endless with AWS, which opens an entirely new avenue for growth in Amazon’s business model. This was the intention when developing the platform, the solution to all business problems. This platform is hosted on centralized cloud services so they can be easily accessible whenever and wherever you are.

The Takeaway

Despite Amazon missing analyst estimates, this doesn’t necessarily mean Amazon is doomed.  Amazon still grew in their quarterly revenue results, yet their stock fell. I believe that this says it all when it comes to what Wall Street can influence.

The falling share price is a positive for long-term investors looking to open a position or add to it because this decline was overly dramatic. Amazon fundamentals are still improving.

Guidance for the next few quarters is only expected to be less significant because of the year-over-year overlap with the lockdowns in 2020. This means it will show smaller revenue growth in comparison, but does not mean they are losing revenue.

E-commerce is continuing to grow every year as physical retail locations dwindle, which maintains an optimistic long-term future outlook for Amazon, especially alongside their AWS platform which will broaden their capabilities worldwide over time.

Not Investment Advice Indie Investor is for general information use only. It must not be relied upon by readers when making (or not making) their investment decisions. If in doubt you should seek advice from a professional financial adviser.

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