One Growth Stock to Buy Right Now
This article was originally published on this site
Sometimes, the best investments are right in front of us. I believe this is the case today with Amazon (NASDAQ:AMZN).
The $1.7 trillion e-commerce and cloud-computing giant may have already helped compound shareholder capital significantly. But investors shouldn’t count this megacap stock out yet when it comes to potential investment returns. Amazon is still in growth mode — and its shares are trading at a surprisingly reasonable valuation in relation to its long-term prospects.
Here’s why Amazon is a great growth stock for investors to consider buying today.
E-commerce is just getting started
Sure, Amazon’s $386 billion in 2020 revenue may seem like an awful lot. Some investors may even wonder how there’s still upside for the company’s top-line figure. But consider this: Global retail sales are estimated at around $25 trillion annually, with about $6 trillion in the U.S. Yet e-commerce only accounts for about $4 trillion of global retail sales and less than $1 trillion of U.S. retail sales.
Unsurprisingly, e-commerce is expected to grow as a percentage of overall retail sales in the coming years. eMarketer estimates that e-commerce’s share of global retail sales will increase from 18% in 2020 to almost 22% by 2024. Given e-commerce’s low penetration of global retail sales and its trend of taking greater share of global retail sales over time, there’s still likely a lot of room for Amazon to grow its sales.
Of course, it’s worth noting that not all of Amazon’s sales come from e-commerce. Over $45 billion of the company’s 2020 revenue, for instance, came from cloud computing — a market that’s growing even faster than e-commerce.
Strong fundamentals
Beyond this high-level look at Amazon’s e-commerce market opportunity, the company’s financial performance notably speaks for itself. Total sales climbed 38% year over year in 2020, with net income surging from $11.6 billion to $21.3 billion. This strong net income growth in 2020 came even though the company spent billions of dollars on COVID-19-related costs.
Of course, Amazon benefited from the strong tailwind of consumers sheltering at home in 2020 and turning to e-commerce to replace some of the items they previously bought at brick-and-mortar stores. But it’s worth noting that management is still seeing strong momentum going into 2021. Management guided for first-quarter revenue to increase 33% to 40% year over year.
Amazon trades at about 80 times earnings today. But the company’s strong lead in both e-commerce and cloud computing, top- and bottom-line momentum, and large addressable markets for continued growth over the next 10 years make this a fair (if not great) price to pay.
Sure, there’s bound to be some downturns in the stock price from time to time. But the stock looks like an attractive buy today for investors willing to hold shares for the long haul.
Should you invest $1,000 in Amazon.com, Inc. right now?
Before you consider Amazon.com, Inc., you’ll want to hear this.
Investing legends and Motley Fool Co-founders David and Tom Gardner just revealed what they believe are the 10 best stocks for investors to buy right now… and Amazon.com, Inc. wasn’t one of them.
The online investing service they’ve run for nearly two decades, Motley Fool Stock Advisor, has beaten the stock market by over 4X.* And right now, they think there are 10 stocks that are better buys.
*Stock Advisor returns as of February 24, 2021
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon. The Motley Fool recommends the following options: long January 2022 $1920.0 calls on Amazon and short January 2022 $1940.0 calls on Amazon. The Motley Fool has a disclosure policy.
