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Why Amazon (AMZN) Stock Is A Strong Buy Right Now

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Nearly everyone knows that Amazon (AMZN - Free Report) stock has been one of the hottest on Wall Street for years. Yet some assume now is too late to get in on the fun, which simply isn’t true. So let’s take a look at why investors should buy Amazon stock right now following yet another quarter of stellar growth.

Overview

Amazon is still an online retail firm at its core, selling and delivering packages—it even reported physical store sales of $4.31 billion in Q2. The company’s hyper-quick delivery model has shaken up the retail and e-commerce world, likely for good. Amazon has prompted some of the largest and most successful companies, including Walmart (WMT - Free Report) and Target (TGT - Free Report) , to quickly adapt their business models, or be forced to watch Amazon grab more and more market share.

Jeff Bezos’ firm is ready to dive deeper into the pharmacy industry, in a move that has already forced CVS (CVS - Free Report) and Walgreens Boots Alliance WBA to bolster their online shopping and delivery options. Amazon was also one of the first traditional tech companies to get into movies and TV. Today, Prime Video and Amazon Studios offer an array of movies and TV shows, from big-budget action series to indie-style dramas featuring A-list Hollywood stars that will help it compete in the internet-supported TV age against Netflix (NFLX - Free Report) , Hulu, and soon enough Disney (DIS - Free Report) and Apple (AAPL - Free Report) .

Just as Amazon was one of the first companies to become a major online shopping power, the firm had a roughly seven-year head start in cloud computing with its Amazon Web Services business. In its recently reported quarter, Amazon’s AWS business popped 49% from $4.10 billion to hit $6.12 billion, which marked the company’s biggest year-over-year gain over the last six quarters in this growing category.

Plus, there is still plenty of room to grow. The overall spend on cloud infrastructure services jumped 50% in Q2, according to the most recent data from Synergy Research Group. Amazon reportedly grabbed 34% of the total market share, with Microsoft (MSFT - Free Report) coming in second at 14%, trailed by IBM’s (IBM - Free Report) 8%, Google’s (GOOGL - Free Report) 6%, and Alibaba’s (BABA - Free Report) 4%.

Now, Amazon looks poised to bring even more of its computing in-house, which should help the company increase its margins. The e-commerce powerhouse will reportedly move completely off Oracle’s (ORCL - Free Report) proprietary database software by the first quarter of 2020, according to a CNBC report.

Stock Movement

Shares of Amazon have skyrocketed over 500% during the last five years, crushing its industry’s 108% climb. AMZN’s growth has been steady over the last three years, up 240%. Amazon has also seen its stock price surge over 54% year to date.

 

Valuation

Amazon’s valuation picture is one of the only real concerns for some investors because it has remained sky-high. AMZN is currently trading at 105X forward 12-month Zacks Consensus EPS estimates, which marks a massive premium compared the S&P’s 17.2X and the Electronic Commerce Market’s 44X. However, Amazon’s management doesn’t really care about this and likely won’t while it aims to expand, with Bezos actively chasing rapid growth over almost everything else.

Outlook

Looking ahead, AMZN’s Q3 revenues are projected to climb by over 30% to hit $56.91 billion, based on our current Zacks Consensus Estimate. AMZN’s full-year sales are expected to reach $234.82 billion, which would represent a roughly 32% climb.

Amazon’s third-quarter EPS figure is projected to jump from $0.52 in the year-ago period to $3.21 per share. The firm’s fiscal 2018 earnings are expected to skyrocket 279%.

Earnings Trends

Amazon has seen nine upward earnings estimate revisions for Q3 within the last seven days, against just one downward change. More importantly, AMZN has earned 12 revisions with 100% agreement to the upside during this same window, for both its current year and fiscal 2019. This means that analyst sentiment has turned more positive following Amazon’s second-quarter financial results.  

Amazon is currently a Zack Rank #1(Strong Buy) based on its strong earnings revisions trends. The company is also expected to continue to lead the cloud computing charge, and expand into even more industries. Lastly, investors who want to buy shares of AMZN must always ask themselves if they see the company or its stock fading significantly anytime soon.

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