With theDowJones Industrial Average (^DJI 0.61%) down over 1,200 points at the time of this writing and the Nasdaq Stock Market down 5.6% in one day, it can be intimidating to think about stocks in general, let alone put new money to work right now. But if you don't need the money right away, times like these are also exciting because they represent buying opportunities to take ownership of some of the stock market's most dynamic names at a discounted level.
A litmus test
One such name that fits the bill is Amazon (AMZN 2.00%).
I often think of Motley Fool founder and CEO Tom Gardner's litmus test that asks, "If a company were to disappear, would people notice it?" Few companies today pass that test more resoundingly than Amazon.
Whether it's reordering laundry detergent when you run out, buying a gift for Mother's Day because you need it fast and you can be reasonably confident that it will show up in two days, or even watching a Major League Baseball game or a children's cartoon, many of us interact with Amazon on a daily basis.
Despite this ubiquity, after an 8% drop today, Amazon is now down 25% over the past month, and it is down almost 40% from its 52-week high. Despite the sell-off, Amazon shareholders have plenty of catalysts to look forward to. The upcoming 20-for-1 stock split in June does not affect the actual value of Amazon, but it will make the stock more accessible to a broader pool of investors, which should spur volume and support the share price.
Image source: Getty Images.
While some investors are less enthusiastic about Amazon's core e-commerce business because they view it as a capital-intensive and lower-margin operation, it is also a fortress that the company has built with high barriers to entry. There are very few companies that would be able to compete with Amazon on this front or replicate the massive infrastructure it has built, so this moat should be durable for years to come.
Amazon Web Services (AWS), the company's high-margin cloud services business that many investors view as the crown jewel of the company, grew revenue by 37% to $18.44 billion in the first quarter of this year compared to Q1 2021, which is remarkable for a business of this size. Many investors don't realize that Amazon also has a growing advertising business that doesn't get nearly enough attention -- ad sales grew 25% year over year to $7.88 billion in Q1, which is a run rate of over $30 billion in revenue for the year. Advertising on Amazon is a particularly attractive position to advertisers because it is a shopping-native platform. Consumers are already coming there with the intent of buying something, so the advertisers are closer to the point of sale.
The company also just announced some exciting news with the launch of Buy With Prime, which will extend the benefits of Amazon Prime to other websites. This is a way that Amazon can leverage the strength of its logistics network and extend its reach with consumers even further. I think this will be a win-win for Amazon and other merchants. I know from my own experience that I would be much more likely to buy something from a different website if I could do so with the same ease that I can on Amazon Prime, and this will be a compelling perk for many consumers.
Is Amazon a buy?
While seeing a screen full of red tickers in one's portfolio never feels good at the moment, these are opportunities to build positions in some of the world's best companies at substantial discounts.
Amazon has created tremendous value for shareholders over the years, with a gain of 940% over the past decade. The long-term trend is up and to the right, and the current sell-off is a speed bump in the road to growing returns that is inevitable in the stock market over time. Amazon is chugging along with its e-commerce and logistics business, growing revenue in its advertising segments, rolling out promising features like Buy With Prime, and it still has the catalyst of the upcoming stock split ahead.
Amazon looks like a buy at these levels, and I am getting ready to add it to my portfolio.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Michael Byrne has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon. The Motley Fool has a disclosure policy.
FAQs
The Motley Fool has positions in and recommends Amazon. The Motley Fool has a disclosure policy.
Is Amazon a good stock to buy right now? ›
Based on analyst ratings, Amazon's 12-month average price target is $228.21. Amazon has 23.98% upside potential, based on the analysts' average price target. Amazon has a consensus rating of Strong Buy which is based on 30 buy ratings, 0 hold ratings and 0 sell ratings.
What is Motley Fool's All in Buy Alert stock? ›
We regularly see similar ads from the Motley Fool about “all in” buy alerts, sometimes also called “double down” or “five star” buys, and they're generally just the type of steady teaser pitch that they can send out all year, over and over with no updates, to recruit subscribers for their flagship Motley Fool Stock ...
Does Motley Fool recommend when to sell? ›
We do realize however that significant price changes over time are worrisome to our members, and try to post additional articles and research on stocks that have seen a down turn. If a buy recommendation turns into a hold or a sell recommendation, we will always let you know.
What are the 10 stocks The Motley Fool recommends? ›
Top growth stocks in 2024
| Company | 3-Year Sales Growth CAGR | Industry |
|---|
| Netflix (NASDAQ:NFLX) | 8% | Streaming entertainment |
| Amazon (NASDAQ:AMZN) | 10% | E-commerce and cloud computing |
| Meta Platforms (NASDAQ:META) | 11% | Digital advertising |
| Salesforce.com (NYSE:CRM) | 15% | Cloud software |
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What will Amazon be worth in 5 years? ›
Forecasters predict that Amazon will reach $200 per share a year from now and will continue to rise to $250 per share at the end of 2026. In 2027, the prediction is for a price of $300, and $250 by the end of 2028.
Is it safe to invest in Amazon right now? ›
Despite the recent slide, Wall Street analysts are broadly positive on Amazon stock. Of the 66 Amazon stock analysts following the company, 95% hold a buy rating, according to FactSet. That's among the highest percentage for all stocks tracked by FactSet.
Will Amazon stock go up in 2024? ›
We arrive at Amazon's valuation, using an RPS estimate of around $61.48 and a price-to-sales (P/S) multiple of just below 3.5x in fiscal 2024. This translates into a price of $213, which is 16% above the current market price.
What is Motley Fool's double down stock? ›
Therefore, stock market winners are more likely to continue to win. When Motley Fool investing services such as Motley Fool Stock Advisor and Motley Fool Rule Breakers re-recommend buying a stock, it's called a "double down buy alert."
Best stocks in 2024
| S.No. | Name | CMP Rs. |
|---|
| 1. | Man Infra | 197.70 |
| 2. | BLS Internat. | 364.05 |
| 3. | Black Box | 524.00 |
| 4. | RHI Magnesita | 601.95 |
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What is the rule of 72 Motley Fool? ›
Let's say that you start with the time frame in mind, hoping an investment will double in value over the next 10 years. Applying the Rule of 72, you simply divide 72 by 10. This says the investment will need to go up 7.2% annually to double in 10 years. You could also start with your expected rate of return in mind.
What is the 3-5-7 rule in trading? ›
The 3-5-7 rule in trading is a risk management guideline that suggests limiting the amount of capital you put into any single trade. According to this rule, you should not risk more than 3% of your trading capital on any one trade, no more than 5% on any one sector, and no more than 7% on all trades combined.
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Performance. Motley Fool prides itself on the historical performance of Stock Advisor's investment picks. In fact, the team has an average stock pick return of 628% and has quadrupled the S&P 500 over the last 21 years, according to its website.
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Motley Fool Stock Advisor has a strong track record of stock recommendations with investment returns that have outperformed the broader market over the long term. Investors are still advised to diversify their portfolios with more than just Motley Fool Stock Advisor's picks.
Can Motley Fool be trusted? ›
Since 1993, The Motley Fool has been a trusted source of investment and financial advice to millions of members. Read their reviews showcasing our commitment to making the world smarter, happier, and richer. We are dedicated to customer feedback in order to provide the best services possible.
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Why investors are so keen on Amazon? ›
Additionally , Amazon has a diverse range of businesses , including e - commerce , cloud computing , and streaming services , which have all seen significant growth in recent years . This diversification can help mitigate risks and provide stability for investors .
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