The stock market rally of 2019 is showing no signs of losing steam. Amidst this rally, FAANG stocks like Apple and Amazon have outperformed other stocks significantly.
To close out January, sales data from the holiday season came out and exceeded investor expectations. Sales in the quarterly period covering the holiday season saw net income rise 8% to $3.3 billion- $1 billon higher than expected figures. This strong performance was enough to push Amazon past the $1 trillion market capitalization mark and a stock bump of 13% on Jan 30th.
Amid the surge, some investors are wondering whether it is the right time to buy amazon shares. Such blue-chip tech stocks have been a boon for traders, but everyone still has the dot com bubble fresh in their minds. However, this is not necessarily a fair comparison because current tech giants have proven market utility and generate income consistently.
Amazon now has more than 150 million paid members in its loyalty club Prime. This mark represents a 50% rise from previous disclosure in the past year of operation. Besides making a mark in the package delivery sector, Amazon has ventured into television and music streaming, cloud services, digital advertising, groceries, and prescription drugs.
Such diversity in revenue generation is making Amazon’s footprint more extensive and increasing revenue.
The Chinese Market
In the past two weeks, the Coronavirus outbreak in China has been the dominant headline in the news. China is doing its best to grapple with the crisis, but as deaths cross over the 1,000 mark, the stakes are higher than ever.
The World Health Organization rightfully declared Corona Virus a global public health emergency, as its impact looks to surpass that of the deadly Sars virus outbreak about two decades ago.
As medical researchers work around the clock to battle the outbreak, the impact on corporations operating in China is already apparent. Starbucks, for instance, has had to close thousands of stores across China. Airlines have also seen serious disruptions in this route.
President Trump has tried to reassure investors this week that this outbreak will come under control soon. Should his projections be right, it will be a welcome relief to stock market traders globally. China has the nickname ‘the world’s factory’ and deservedly so. Besides, it is a massive market for several Western corporations.
Notably, Amazon has less exposure to the Chinese market than Apple Inc. and other large corporations. Therefore, even in the worst-case scenario, Amazon will weather this storm better than others.
However, any effect on global and even regional commerce is unwelcome. Amazon CEO, Jeff Bezos, has visited China’s neighbor, India, a few times to invest and grow in the world’s largest democracy. Amazon views India as a strategic market and hopes to get a significant return on its investment there.
Amazon Stock Flashing Buy Signal
Stock market indices like the Dow Jones and S&P 500 have displayed investor concern over Coronavirus. The impact of shutdowns on manufacturing in China is atop the list. Amazon stock is on a roll right now and, together with other stocks like Vertex Pharmaceuticals (VRTX) and Western Digital (WDC), flashed buy signals to end the previous month of trading. The latter two performed great, but Amazon’s surge was the most significant.
The million-dollar question is whether Amazon stock still has room for growth. At press time, Amazon stocks traded at 2,133.91, a ridiculously impressive stat. Investors looking to get into this market are wondering whether this mark can inch even higher.
From a revenue standpoint, Amazon has consistently outperformed the market in recent years. Revenue rose from $136 billion in 2016 to $280.5 billion in 2019. With a record number of prime subscribers as well as the growth of other services, total revenue should be higher for 2020. Such numbers will boost net income, which is necessary for a company that needs to expand even more.
It is important to always prepare for market downturns and upheaval. However, Amazon’s resilience in the wake of Coronavirus can be a useful trait in the future. For the time being, there is little sign of a serious slowdown in the American economy, with the Dow Jones still operating at record highs.
Therefore, Amazon stock still has room to grow. Already one of the world’s largest online retailers, it is not wise to place a ceiling on its incredible rise. Revenues from affiliate services like streaming will be of particular interest to investors. In a prolonged bull market scenario, this is a vital stock to watch.