Amazon.com Wants to Dominate Retail and Cloud
If I was forced to choose only one stock for my investment portfolio, my pick might end up being Amazon.com, Inc. (NASDAQ:AMZN), which just traded at a record high and is heading toward $1,000 as founder Jeff Bezos continues to look at ways of dominating various spaces of the market.
Powered by another impressive quarter in which Amazon.com showed great strides in its cloud business, Amazon stock has advanced 25% so far in 2017, and 55% over the last year.
There is really nothing negative to say about Amazon.com stock, as the company seems to dominate any space it focuses on. Amazon.com is now considered the second-biggest seller of apparel in the United States, according to research by Morgan Stanley (NYSE:MS).
The dominance of, not only the apparel segment, but the retail sector as a whole, is nothing short of spectacular for Amazon. You can see it in the record number of retail store closures, something in excess of 30,000 locations nationwide in 2016.
The reality is that consumers have shifted their shopping to the virtual space, where the ease of comparison shopping has taken the retail sector by storm, and the situation isn’t going to revert back.
Yet, not to be satisfied with the company’s success so far, Amazon.com continues to look ahead and seek out other segments it can dominate.
For example, Amazon is in the early stages of trying to push into the grocery space via its “AmazonFresh” unit. It will not be easy, due to the fact that the majority of grocery shoppers do so via physical stores, as online ordering and delivery have not caught on.
AmazonFresh operates a small network of 21 physical stores in the United States, along with one store each in Germany, Tokyo, and London.
Amazon had looked into acquiring the physical network of Whole Foods Market, Inc. (NASDAQ:WFM) in December, but no offer was made. Now, that doesn’t mean a deal won’t take place in the future, as Amazon.com will need to expand its physical footprint in order to compete.
With the cash available to the company, and the fact that it would likely cost around $14.0 billion to buy Whole Foods, Amazon may choose to do it on its own, via steady and calculated growth.
The first quarter supported the bull case for AMZN stock. Amazon.com recorded $1.48 per diluted share in earnings, well above the consensus $1.08 per diluted share.
But what was intriguing was the company’s stellar growth in the cloud segment, operating under “Amazon Web Services” (AWS), an area that is expected to see explosive growth.
The cloud business generated $3.7 billion in revenues—accounting for about 10% of total revenues—and surging 43% year-over-year, well above the 23% overall growth.
Wall Street is clearly noticing. There have been five higher earnings per share (EPS) revisions for 2017 over the past 30 days, and four higher EPS revisions for 2018. (Source: “Amazon.com, Inc. (AMZN), Yahoo! Finance, last accessed April 28, 2017.)
Amazon Stock Chart Displays Impressive Growth
The long-term chart of AMZN stock shows the steady, unrelenting growth since 2001.
Chart courtesy of StockCharts.com
During that time, the Amazon.com stock price has largely held at above the 50-day moving average (MA), accompanied by a higher trending moving average convergence/divergence (MACD). The relative strength index (RSI) has held near 70% since 2009, which is an impressive sign of staying power for Amazon stock.
Chart courtesy of StockCharts.com
The weekly AMZN stock chart displays numerous breakouts, including breaks at $400.00, $450.00, $700.00, $800.00, $860.00, and $920.00—with $1,000 in the sight lines.
While the Amazon.com stock price could pause, take a breather, and retrench, the outlook looks bullish for the longer term for Amazon as a widow stock.