Is Amazon stock a buy before the upcoming earnings?

Ever since Jeff Bezos started Amazon (NASDAQ:AMZN) as an online book retailer in 1994, people have doubted the company’s long-term success.

Today, Amazon owns the third highest market cap in the world, but few would argue that it is the most valuable brand and nobody would bat an eye if it overtook Apple (NASDAQ:AAPL) at some point in the future.

But for new investors, is Amazon stock a buy after all of these years? Or have you missed the boat on one of the greatest investments in the history of the stock market?

Is Amazon stock a buy?

The first thing inexperienced investors will do is look at Amazon’s daunting share price and not even consider it as an investable stock. Trust me when I say, investors have been doing that with Amazon since it was an unprofitable company trading for a few hundred dollars per share.

If you invested in Amazon a decade ago, the stock would have returned over 1,700%. Share price should never be what determines if a stock is expensive or not. 

Nevertheless, Amazon retains its position as one of the most upgraded stocks on Wallstreet. Remarkably, across the board of 42 Wallstreet analysts all 42 have currently listed a Buy rating on Amazon. JP Morgan analyst Doug Anmuth currently holds one of the streets highest price targets of $4,600 representing an upside of 25%.

Anmuth noted that Amazon’s gross merchandise volume excluding its physical stores will climb to $377 billion this year and reach $457 billion in 2022 which would surpass Wallmarts U.S sales.

Is Amazon stock a buy before the upcoming earnings?

Amazon set to report Q2 earnings on July 29th

The beautiful thing about publicly traded companies is that they give us quarterly earnings reports four times per year. There is no clearer measure of overall company growth than sequential comparisons of its business operations from quarter to quarter and year to year.

Amazon is set to announce its Q2 earnings on July 29th, and if recent performance is any indication, Wall Street estimates will once again be blown out of the water.

Over the last four quarters, Amazon has beaten consensus earnings estimates by 66%, 95%, 67%, and a whopping 606% in Q2 of 2020. The danger for Amazon is going to be that explosive year over year comparison to Q2 of 2020, where the unexpected surge of eCommerce revenue skyrocketed during the COVID-19 pandemic.

But Wall Street is also forward looking. Price action in Amazon’s stock following the earnings report will hinge more on forward looking guidance for the rest of 2021, rather than the year over year comparison. 

Is Amazon stock the same without Bezos?

First of all, Amazon isn’t really without Bezos anymore. He’s promoted himself to the role of Executive Chairman while Andy Jassy resumes the role of CEO. Amazon revolutionized the global retail business and changed the way we think about eCommerce forever.

Think about how disappointing it is when you order something from another site and next day shipping isn’t an option. 

But the future of Amazon arguably lies in the Amazon Web Services Cloud segment (AWS) of its business. No matter how big Amazon scales its eCommerce business to be, it simply cannot compete with the rapid growth and low margins of AWS.

Last quarter, AWS already accounted for 12% of the company’s total revenues, and many on Wall Street would value AWS at over $500 billion if it were spun off into a separate entity.

So when AWS soon becomes Amazon’s largest money maker, who better to lead the company than the founder and creator of AWS: Andy Jassy. 

Is Amazon stock a buy before the upcoming earnings?

The bottom line – Is Amazon stock a buy?

Amazon’s earnings should receive a boost from its annual Prime Day event which took place in June this year, which may have been planned to provide Jassy with a soft landing in his first earnings report as CEO.

How will the stock perform for the rest of 2021? Price predictions can be dangerous, especially in a market that has shown as much volatility as it has this year. Besides, if you are a long-term investor, short-term price targets should not matter to your overall investment thesis.

In saying this, with an average price target 14% higher than the current trading price we can conclude majority of Wallstreet are backing AMZN stock.

Furthermore, every target released in the past quarter has priced AMZN stock at $4,000 or higher. This is suggesting analysts are confident the stock will breach $4,000 in the next 12 months.

The information above is not financial advice. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.

Edited by Tyger Fitzpatrick

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