Amazon Is Still a Buy

There are many reasons that investors should still buy Amazon, but will Netflix and eBay allow this to happen?

Mar 5, 2014 at 9:08PM

Investors were not happy with Amazon's (NASDAQ:AMZN) recent results, and consequently the company's stock dropped more than 10%. However, there are still many reasons why investors should buy the company's shares. The company's web services sector is a fast-growing business, it has continued its tradition of constantly innovating its services and products to increase the satisfaction of customers, and it is focused on a long-term growth strategy.

The web services sector has a great potential
Amazon's web services sector recorded an impressive growth rate in the last quarter. Though it brought less than 8% of the company's domestic revenue, it posted 52% revenue growth. Of course, it generated less than 1% of Amazon's revenue on the international front. However, it recorded a 25% year-over-year revenue improvement in this market segment. IDC Research said the worldwide public cloud services revenue is expanding at a double-digit growth rate. Given that the web services sector recorded sales of less than $4 billion in 2013, you should get an inkling of how large Amazon's potential is.

Amazon is constantly innovating
Amazon is always evolving new means to deliver its products, including the possibility of dispatching drones to deliver products for customers. The innovations enrich customers' experience and bring a great advantage over the company's rivals in a competitive environment. Wal-Mart has grown its revenue by 77% in the past decade, but Amazon has recorded a revenue increase of more than 1,000% at the same time. In addition, analysts expect earnings growth next year of 132.47% over this year's earnings.

It is also about long-term growth
The brick-and-mortar beginning of numerous retailers is accompanied by challenges in terms of tradition and innovation. The companies are focused on quarterly margins and same-store sales. Amazon, meanwhile, is focused on the long term. This is reflected in the billions of dollars that the company is investing in future expansion. Amazon is expanding into new sectors, with groceries being just one fantastic example. Over the next five years, analysts that follow this company are expecting it to grow earnings at an average annual rate of 28%.

Netflix (NASDAQ:NFLX) is following a similar pattern to Amazon. It is trading its revenue growth for its free cash flow. The company competes with Amazon's Instant Video for customers, and recently announced that it would pursue documentaries more aggressively in a bid for more original content. Netflix has massive potential in its streaming business. The worldwide streaming video market is expected to hit $35 billion in revenue by 2018.

eBay (NASDAQ:EBAY) concentrates on its PayPal and Marketplaces business. Its PayPal division wants to maintain its market share in the worldwide payment market, and wants to own the payments space. Due to the potential in the sector, eBay will want to expand this business quickly. Gartner expects global mobile transaction volume to average a 35% annual growth rate between 2012 and 2017. It is also forecasting that the market will worth $721 billion by 2017.

Final Foolish thoughts
Strong reasons abound for buying shares of Amazon. The company's web services business is showing fast growth, and Amazon is constantly innovating for the satisfaction of the ordinary customer. The company is also focused on a long-term growth strategy in its operations. Over the long term, its strategy will continue to result in market share gains.

Amazon's not the only great growth pick out there
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Mark Girland has no position in any stocks mentioned. The Motley Fool recommends, eBay, and Netflix. The Motley Fool owns shares of, eBay, and Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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