AMZN Stock: Amazon.com, Inc. Is Disrupting the Retail Space

AMZN StockWhy you Should be Bullish on AMZN Stock

Delivering alpha in the technology sector is about the ability to find emerging or established companies that employ disruptive technologies. One of the biggest disruptors is Amazon.com, Inc. (NASDAQ:AMZN) which, under the tutelage of founder Jeffrey Bezos, has revolutionized the way the retail sector operates.

AMZN stock reached a record $839.84 on Friday with a staggering market cap of $400.0 billion. Now, there are bigger companies, but what Amazon.com, Inc. has done to disrupt the retail sector makes the company a generational stock.

Just think back to the old-economy retailers whose objective was to drive traffic to stores. At the top of the heap was Wal-Mart Stores Inc. (NYSE:WMT), but the entire sector and how consumers shop has changed since the disruptive technology called the World Wide Web or Internet came into the mainstream.

Amazon.com, Inc. has mastered the online retail market via its sales platform that has tens of millions of shoppers coming to it each day from the comfort of their homes, offices, or mobile locations. Think about it. Amazon.com is open 24/7 for business. You simply cannot say the same for physical stores, which are limited to hours and products.

Why you Should be Bullish on AMZN Stock

Amazon.com, Inc. has not developed a next-generation chip, hardware or software like many technology companies in Silicon Valley. However, AMZN stock has perfected the game-changing online technology and process for shopping that has forced all of the old-school retailers to play catch up.

The company’s “Amazon Web Services” (AWS) segment, which includes the “Amazon Prime” streaming video service, cloud storage, and even grocery deliveries via “AmazonFresh,” has not only helped to diversify revenues but is now challenging other more established companies in their space. Just look at the impact of Amazon Prime on Netflix, Inc. (NASDAQ:NFLX).

What Amazon stock has been able to do is monetize its massive user base of tens of millions of shoppers to encourage them to spend on other company products. By cross-selling products and services, Amazon.com, Inc. has driven impressive revenue and earnings growth, pushing up the shares of AMZN stock.

Amazon.com, Inc. currently delivers groceries to around 11 U.S. cities and London, England. It’s not at a massive scale, but the point is that it allows Amazon.com, Inc. to harness its strength in the delivery space. The company is also looking at using drones for delivery.

Amazon.com, Inc. is Worth Massive Valuation

With the price of Amazon.com, Inc. stock setting record highs and marching on the path to becoming a $1,000.00 stock, there are questions surrounding the validity of its valuation.

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Chart courtesy of StockCharts.com

Trading at 208 times its trailing earnings and 80 times its 2017 earnings per share (EPS), and 24 times the book value, Amazon stock is not cheap, but it is not ridiculous either. The price/earnings to growth (PEG) ratio of 2.81 is not outlandish, as there’s a lot of growth priced into the share price of AMZN stock.

Revenues are predicted to grow 28.0% and 21.90%, respectively for 2016 and 2017. Amazon.com, Inc. has increased its gross margin from 27.23% in 2013 to 29.49% in 2014 and 33.05% in 2015. (Source: “Amazon.com, Inc. (AMZN),” Yahoo Finance!, last accessed September 30, 2016.)

These are pretty good metrics for AMZN stock, given the size of the company,

Earnings are expected to track revenues higher in 2016 and 2017. Wall Street has taken notice as the EPS estimates over the past 30 days were increased five times for 2016 and seven times for 2017 (Source: Ibid.)

The bottom line is that Amazon.com, Inc. has all the tools to dominate the retail space via its disruptive platform.