Here’s Everything You Need to Know Before You Invest in An Amazon Stock
Amazon has long since ceased to be just an e-commerce company. If we buy an Amazon stock, we are investing in a globally integrated company with a very diverse business.
Amazon is one of the most famous companies today. This technology multinational, founded in 1994 by Jeff Bezos, has achieved success in areas such as e-commerce, cloud computing, and artificial intelligence. So, it’s no surprise that thousands of people wonder how they can get their hands on an Amazon stock every day.
Amazon stock’s price and strong performance have drawn investors from around the world to invest in the tech giant.
A Look at The Company and Its Listing on The Stock Exchange
Amazon went public on the Nasdaq in 1997 under the symbol NASDAQ: AMZN at $18 per share, and on September 4, 2018 became the second company in history to have a market capitalization of more than $1 trillion.
The company is now the world leader in e-commerce, so much so that it seems to control the industry. Their competitors have no real margin of safety to increase their market share and try to compete.
But before answering the question of how to invest in Amazon, we can note two black spots that the company could improve on:
- Amazon Finance: Its business model has not stabilized, threatening its operating profitability. Shareholders began to question the development of financial indicators.
- Amazon’s market share in online commerce. Their virtual monopoly has been condemned many times.
Amazon is a large company that offers a wide range of products: from an international e-commerce platform to streaming services to software and electronic devices.
In 2019, the company was named the world’s largest e-commerce retailer by online revenue, and the second largest employer in the United States.
Amazon’s earnings, coupled with the strength and confidence of the company, always make investing in Amazon stock (AMZN) an interesting bet.
Amazon’s Advantage Over Its Competitors
Amazon’s advantage over traditional competitors is that they don’t invest in physical stores.
- Thanks to scale economies of saving time and money, Amazon’s strategy is 100% focused on customer needs, including pure selling.
- Inventory management allows Amazon to offer competitive prices on all types of products.
- Amazon’s success in changing consumer habits: Many households around the world are used to shopping online rather than in stores.
Before you decide to invest in Amazon, let’s do an in-depth fundamental analysis of its finances.
Revenue: $149.2 billion, vs. $145,640 expectation. Earnings per share (EPS): $0.03 per share versus expectations of $0.17
Although the second half of the year was good, the overall results for 2022 were disappointing compared to 2021. Amazon lost $2,722 billion, heavily impacted by its $33.4 billion profit last year.
Despite higher revenue in 2022, Amazon has struggled with its investment in electric car company Rivian Automotive, which is also affected by exchange rates. These results were not exactly favorable for Amazon, which has been reflected in the drop in stock prices.
Split Amazon Stock 20×1
Due to the incredible long-term performance of the AMZN market, they trade around $3,000, which is a very high price for those looking to invest in Amazon. Therefore, it was decided to do a 20×1 stock split in June 2022.
The result were as follows:
The price of Amazon stock has fallen 20 times, making it more affordable and investment-friendly. The number of shares on the market is multiplied by 20, so for every share an investor owns, they get an additional 19 shares. The shares rose as a result of the aforementioned split.
The increase in the price of AMZN has been huge in the stock market. That means profit for many, but it also means others can’t buy Amazon stock because it’s too expensive. However, the price has been bearish since the end of 2021 due to the general fall in technology stocks and the poor performance of Amazon.
This, combined with the stock split (now trading at a lower and therefore more affordable price), has led many investors to believe that now is a good time to invest in Amazon to make money.
Invest In Amazon Stock
Amazon stock is listed on the NASDAQ stock exchange under the trading name “AMZN”. If you want to become an Amazon shareholder, you can apply with a broker, hire a financial advisor, or buy directly from the company.
If you choose the first option, you just need to find a reliable company, open an account, decide how much you want to invest and pay for your next AMZN stock. The only thing to consider when buying real stock is the high price.
A financial adviser is another option you can use to buy stocks. When you work with a broker, you are responsible for all your decisions and you can search for expert advice only on the Internet. Instead, an advisor can help you make investment decisions.
One of the advantages of buying physical stocks is the long-term investment potential and higher returns for a lesser risk. Also, even if the company doesn’t pay dividends, you can use the experience to improve your investing skills.
On the other hand, the limitations include delayed returns (you have to hold the stock for three to five years, so you can miss out on interesting opportunities), the complex analysis required to work, and the fact that you have to make a lot of money.
Invest In Amazon Through CDFs
A contract for difference (CFD) is an opportunity to trade shares without owning the stock, but by speculating on price differences. CFDs do not allow you to buy shares. All you can do is negotiate price changes.
CFD trading is also done through a broker, open an account, select AMZN shares, and place an order. The main advantage of CFD trading is that you can make quick profits in two ways, not only by buying AMZN, but also by selling it (even if you don’t own it).
You also don’t need a lot of money to place your first order and trade Amazon shares, and you can even choose the leverage options your broker offers to get more money. On the contrary, the disadvantage of this type of investment is the great risk that short-term operations face, in a very volatile market.
Analysis And Forecast When Investing in Stocks
You don’t need any special tools to predict the direction of an Amazon stock. If you are familiar with these two types of analysis: technical analysis and fundamental analysis, you will not have any difficulties.
In order to predict stock prices and make the right decisions about investment strategies and what you choose to open or close positions, it is important to understand what technical analysis and fundamental analysis are.
- Fundamental analysis
We start with a fundamental analysis to determine if a stock is oversold or overbought:
- Income reports. It is an essential part of any inventory analysis. Earnings data is released quarterly to show how companies are performing.
- Industry news. Amazon owns one of the largest shares in the technology industry. This means that important events in the industry will affect the operation of the company.
- To ensure that the value of the company does not change, it is essential to understand its internal problems. To stay up to date, you can read news about the company.
- Technical analysis
To use technical analysis and predict market movements for AMZN, we recommend using Fibonacci Retracements, Oscillators, or Volume. Technical analysis requires a lot of practice.
It is worth practicing on a demo account before going to the real market and spending real money.
How To Reduce the Risk of Trading Amazon Stock?
Although Amazon shares are among the most stable on the market, they remain valuable stocks in a naturally volatile environment. Therefore, one must be prepared for unexpected events that may affect them. Here are some ways to reduce your risk when investing in Amazon.
Amazon is in the technology business. This means that you should invest your money in stocks in another industry if the market moves against you. It is also important to keep some financial reserves.
If the market moves against your predictions, you should always be able to take another trade to get your money back or invest in a better opportunity. Diversification will always support you by ensuring that you benefit from one industry, even when another industry is struggling.
- Choose a reliable broker
It is very important to find a broker that offers reasonable commissions, reasonable fees, and attractive returns. At the same time, the broker should offer a convenient trading platform with many indicators and technical settings.
Take a look at the platforms that offer demo accounts and learn all the tools you need to create truly effective analytics.
- Analyze like a pro
The important thing is that you can make your own predictions and not trust the predictions of others. Earlier, we mentioned the fundamental analysis factors to consider when predicting an Amazon stock price. In addition, you should familiarize yourself with technical analysis and its indicators in order to study the market more professionally and thoroughly.
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