Amazon Stock: Is It a Good Buy Right Now?

Szczecin, Poland-November 2018: Amazon Logistics Center in Szczecin, Poland in the light of the rising sun,panorama.
Mike Mareen / Shutterstock.com

Amazon (Nasdaq: AMZN) stock has been on an upward trajectory since day one, and there seems to be no end in sight. But with shares currently trading at over $3,300 each, it’s a significant investment. Here’s what you need to know about whether Amazon stock is a good buy right now.

Results for Second Quarter 2021

Amazon announced its results for second quarter 2021 on July 29. The company reported that it earned $15.12 per share, higher than the $12.30 analysts expected. Revenue, however, came in at $113.08 billion, which was less than the $115.2 billion that was expected, CNBC reported.

Revenue was 27% higher than the same period the previous year, which is significant, but less than the 41% increase in revenue seen in the second quarter of 2020 over 2019. The increase in revenue in 2020 was primarily due to the coronavirus pandemic, and the fact that online sales increased significantly as people chose not to shop in stores. Amazon acknowledged that grow is likely to continue to slow in the coming quarters as shoppers return to brick and mortar stores.

Earnings Beat Estimates, but Revenues Did Not

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Before a company releases its quarterly earnings, the analysts who follow that company, and others in the same industry, estimate what they think the company will report for revenue, earnings per share and other metrics. These estimates are known as “consensus estimates.”

In the second quarter of 2021, Amazon beat the consensus estimate for earnings per share by reporting $15.12 compared to the consensus estimate of $12.30, as reported by CNBC. This means the company earned more per outstanding share of stock than the analysts thought it would.

Second-quarter revenues were a different story, however. The company was expected to announce revenues of $115.2 billion, but instead, announced $113.08 billion.

Good To Know

An earnings beat combined with a revenue miss means that more of the company’s revenues came from higher-profit areas of the business. In the case of Amazon, this means cloud computing, advertising, subscriptions and Amazon Web Services (AWS). In general, this would bode well for future results, since higher-profit products and services are becoming a larger share of the overall business.

Expectations for the Third Quarter

Amazon did provide guidance for the third quarter, unlike some other tech companies. The company expects net sales in the third quarter of 2021 to be between $106 billion and $112 billion, reflecting an increase of 10% to 16% from the same period last year. Amazon expects that its operating income in the third quarter will be between $2.5 billion and $6.0 billion. Even the high end of this range would be a decline from the third quarter of 2020, which saw operating income of $6.2 billion.

The company indicated that the third quarter of 2020 was outstanding, due to the increase in online shopping resulting from the pandemic. This means that the comparison of this year’s third quarter to last year’s will be challenging. Thus, the company expects lower operating income in the third quarter of 2021 than it saw in the same quarter last year.

Is Amazon Stock a Good Buy?

 Investors who bought Amazon in the past have done very well, but if the past year and a half has taught investors anything, it’s that anything can happen, and you may not see it coming.

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What the Analysts Say

According to Yahoo Finance, of 47 analysts who followed Amazon stock in July 2021, 15 rated it a “strong buy,” 28 rated it a “buy,” three rated it a “hold,” and one gave it a rating of “underperform.” None of the analysts recommended selling it. This gives Amazon stock an average rating of 1.7 on a scale of 1 (strong buy) to 5 (sell).

The price of the stock as of July 30 is $3,327.59. This is lower than any of the analysts’ price targets, which range from $3,775 to $5,500.

What You Need To Consider

Analysts who follow technology stocks have high expectations for Amazon, and the e-commerce juggernaut still appears to be unstoppable. But investors who are thinking of getting into Amazon stock now need to understand that they won’t see the growth rates the company saw early on, or even in the recent past. If you decide to get in now, it should be with the intention to hold the stock for the long term.

Finally, when considering whether to buy Amazon, look at the rest of your portfolio. Tech stocks have been on the rise lately, so they may represent a larger share of your portfolio than you may be comfortable with. Make sure you have a good mix of stocks by market capitalization, sector, and growth vs. value orientation.

Our in-house research team and on-site financial experts work together to create content that’s accurate, impartial, and up to date. We fact-check every single statistic, quote and fact using trusted primary resources to make sure the information we provide is correct. You can learn more about GOBankingRates’ processes and standards in our editorial policy.

About the Author

Karen Doyle is a personal finance writer with over 20 years’ experience writing about investments, money management and financial planning. Her work has appeared on numerous news and finance websites including GOBankingRates, Yahoo! Finance, MSN, USA Today, CNBC, Equifax.com, and more.

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