Amazon A Buy?

Amazon outperforms the market. Time to buy?



The number of global coronavirus cases has reached 1 million. Europe, with the exception of Sweden, is on lock down and state by state the US is imposing stay at home directives. This lock down and social distancing measures have cause demand for goods and services to evaporate overnight. Millions of businesses are collapsing. 

Within this mayhem, there are some stocks which are outperforming the market, Amazon is one of them. 

E-commerce
E-commerce was already a big business before coronavirus. However, Amazon has been a lifeline for many in isolation and will have boosted the company’s sales significantly. Business is booming. The e-commerce powerhouse has announced that it will take on an additional 100,000 workers to staff its fulfillment centres and delivery operations.

Amazon Prime / AWS / Prime Music
It’s not just the online shopping area of the business that stands to benefit from lock down. Amazon Prime’s online Video service and Prime Music are seeing an increasing number of customers. The Amazon Web Services, the leader in cloud services is also helping many businesses work through the coronavirus crisis.

Not Just For Lock Down
There is a good chance that the lock down period will have changed many people’s habits. It will have opened up a new way of shopping for many people. Those that have created accounts for Amazon Prime or Video and Music could well keep the services even after coronavirus passes.

Latest Results
2019 results show that Amazon had a phenomenal year, without any lock down. Sales jumped 20% to $281 billion; EPS shot up 14% after the firm invested heavily in one day shipping. Amazon’s balance sheet is also impressive with $55 billion in cash and $23 billion in long term debt. There are plenty of reserves to weather any economic slowdown.

Chart thoughts
Since the coronavirus induced sell off took hold mid-February the broader US market, the S&P is trading down 24%. Amazon is down just 8%. Since its March low, the S&P has rallied 15% whilst Amazon has jumped 19% over the same period.


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