As the coronavirus pandemic deals us blow after blow, companies are feeling the pressure, with isolation leading to a reduction in consumer spending. I personally keep spending my money on snacks, but if, unlike me, you are savvy with your hard-earned cash and think now is the time to invest, then here is a great place for you to start.
Amazon (NASDAQ: AMZN) is a behemoth in both e-commerce and tech and although earlier this year it failed yet again to reach a trillion-dollar market cap, Amazon still has a lot of room for growth. Listed below are three reasons why Amazon is worth your time and money.
1. AI developments
Being a member of Big Tech, it is only right that I start with this topic. Amazon’s 2018 acquisition, Ring has fitted seamlessly within its growing range of AI gadgets. With Alexa’s dulcet tones answering every nonsensical question you throw at her, Amazon has fully integrated itself into smart home systems. This market is expected to grow into a $174 billion industry and Amazon can be expected to be at the forefront of innovation in this area.
Another interesting point to consider is the prediction that Amazon will have automated vehicles driving themselves within the next 5 years — a sector estimated to be worth $416 billion by 2025. This will provide it with a fully self-controlled logistics chain from start to finish. With Amazon investing in startup Aurora, which specializes in automated vehicles and Tesla’s (NASDAQ: TSLA) rival Rivian, it is clear that efficient and fully automated delivery services are a key goal for Amazon — a sector estimated to be worth $416 billion by 2025
2. E-commerce and cloud growth
Everyone enjoys a good browse on the internet, with online shopping reported to be one of the most popular activities in the world. We all need a place to sell (or buy) those inappropriate Christmas presents that aunty Muriel found funny when shopping at the dollar store. In fact, the e-commerce market is growing every year: 2019 saw $3.53 trillion in sales alone, which is expected to top $4.2 trillion this year and a projected climb to $6.54 trillion by 2023. This could be reason alone to invest in Amazon.
Another reason is that, with just under 50% market share in the U.S., Amazon is a powerhouse which will continue to grow with the overall market. Its main competitors such as Alibaba (NYSE: BABA), Shopify (NYSE: SHOP), and Mercado Libre (NASDAQ: MELI) don’t come close to the vast resources that Amazon has at its disposal.
Its not-so-secret weapon is Amazon Web Service. The AWS cloud network makes up a total of 12% of Amazon’s revenue bringing in nearly $10 billion last quarter, and holds one-third of commercial cloud market share. Its clients include Airbnb, Adobe (NASDAQ: ADBE), and Netflix (NASDAQ: NFLX). As more and more companies expand online, AWS will continue to be profitable as a solution to extensive data problems.
3. Healthcare & welfare
With 2018 sales in the U.S. totaling $476 billion, prescription healthcare revenue is on the rise. Amazon, Apple (NASDAQ: AAPL), Google (NASDAQ: GOOG), and Microsoft (NASDAQ: MSFT) have all got a stake in the healthcare market. Amazon with its Pillpack service can be expected to grow into a major player as the e-pharmacy market is expected to grow to $177 billion within the next 6 years.
With elderly and chronically ill people, the convenience of ordering prescriptions to their door is a clear advantage. With coronavirus and uncertainty of the future, many customers will likely opt for a delivery service for pharmaceutical goods rather than standing in close quarters with other sick people. This puts Amazon in the perfect position to supply consumers with much-needed medicine. Amazon’s Pillpack acquisition allows it to service 50 states with an already state-of-the-art and highly efficient delivery system.
Additionally, Amazon is working on Project Kuiper, aiming to launch a number of low orbit satellites that can provide internet access. This project will give millions of people online access who currently live with no basic internet connection.
These seemingly philanthropic deeds will no doubt bring extra revenue to Amazon’s deep pockets. Whilst Jeff Bezos will need to grow some extra fingers for these pies, I am sure the rest of us won’t complain about reducing our overall contact time with sticky, sick people in public places.
With Amazon’s clear ability for growth both outwards and upwards this would, in my opinion, be a safe and steady investment.
MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in companies mentioned above. Read our full disclosure policy here.
Financial Writer at MyWallSt
Poppy’s favorite stock is Nvidia as she loves innovation and this stock has bags of it. Nvidia invented the GPU in 1999 and even today its immersive graphics give life to the gaming world. Poppy is also inspired by Nvidia’s ability to imagine and create positive change for the world, with its AI technology fuelling new developments in the automotive industry, the medical industry, as well as powering data centers around the world.