Loop Capital and SunTrust Robinson Humphrey just upgraded the shares of this mega-tech company to ‘Buy’. Wall Street expects the company to grow by 57.10 % annually in the next five years.
Amazon.com (AMZN)
From Internet Wealth Builder
Amazon.com (AMZN) is one of the world’s largest retailers, but it is also involved in a range of other businesses, such as cloud storage, movies, and video streaming.
The shares briefly cracked through the $1,000 level in July but have since retreated to the current price. Despite the pullback, the stock is up 18% from the time of our original recommendation in January.
Amazon announced an impressive 25% increase in second-quarter net sales to $38 billion, up from $30.4 billion in the same quarter of 2016. That was slightly above analysts’ estimates.
However, net income disappointed. The company earned $197 million in the quarter ($0.40 per share, fully diluted). That compared to $857 million ($1.78 per share) last year. The profit was down due to heavy investment in growth areas like video content for its Amazon Prime streaming service.
“In the last few months, we launched Echo Show (our newest Echo device with a video screen), introduced calling and messaging via Alexa on all Echo devices, debuted Inside Edge on Prime Video (the first of 18 Indian Original Series), introduced Amazon Channels in both the U.K. and Germany, launched four new Fire tablets, expanded Amazon Fresh to Germany, launched Prime Now in Singapore, launched our 25th airplane with Prime Air, hired more than 30,000 new employees, opened three new Amazon Books stores, launched more than 400 significant AWS features and services, migrated more than 7,000 databases using AWS Database Migration Service, and held our third annual Prime Day - signing up more Prime members than ever before,” said founder and CEO Jeff Bezos, in a sentence that must have left him breathless.
“It’s energizing to invent on behalf of customers, and we continue to see many high-quality opportunities to invest.”
Bezos may be thrilled, but investors have turned a little cool lately. Most would like to see a greater portion of the booming sales flow through to the bottom line.
The purchase of Whole Foods was completed in August, and Amazon immediately moved to reduce prices on a wide range of items in the U.S. and Canada. Stocks in grocery companies plunged in response, although there is no evidence yet that Amazon is poised to grab a larger market share. However, investors remember what the company did to booksellers like Barnes & Noble and reacted accordingly.
Action now: Buy. The price retreat offers an entry opportunity. Profits may be temporarily down, but the future potential is huge. But keep in mind that the stock has a volatile history. If you can’t handle that, look elsewhere.
Gordon Pape, Internet Wealth Builder, www.buildingwealth.ca, 1-888-287-8229, September 11, 2017