Please ensure Javascript is enabled for purposes of website accessibility

Amazon Stock: Buy, Sell, or Hold?

By Daniel Sparks – Apr 14, 2020 at 6:30AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

As shares of the e-commerce giant return to an all-time high, what should investors do?

After initially falling sharply during the coronavirus market sell-off, shares of (AMZN -3.01%) have rebounded dramatically. Indeed, the stock closed Monday's trading session just a few dollars below an all-time high achieved in February. Putting the stock's recent rebound into perspective, shares are up 30% since March 30.

Investors who missed out on an opportunity to buy this dip in Amazon's stock price may be wondering if now is still a good time to buy shares of the e-commerce company. Or is the growth stock no longer undervalued?

Boxes in an Amazon fulfillment center

Image source:

Amazon's stay-at-home boom

While COVID-19 is a devastating virus that has hurt many individuals, companies, and economies, it has positively affected a minority of businesses' top-line performance. For instance, one company likely to benefit from more consumers sheltering at home is Amazon. It stands to reason that more consumers will turn to e-commerce with many stores closed and with governments urging citizens to stay home as much as possible.

To better serve its customers during this time, Amazon announced in March that it would hire 100,000 workers to help fulfill demand. But even this wasn't enough. On Monday, Amazon said it has already filled all of those job openings and is now setting out to hire an additional 75,000 employees.

"We continue to see increased demand as our teams support their communities and are going to continue to hire," Amazon said in a blog post about its decision to create an additional 75,000 jobs. 

This news comes as the company is reportedly beginning to ship more nonessential items after temporarily limiting these shipments to prioritize goods like cleaning, healthcare, and food products. The company is allowing third-party sellers on its platform to start selling nonessential items this week, sources told The Wall Street Journal this week. 

Should you buy Amazon stock?

Cowen analyst John Blackledge remains particularly bullish on shares during this pandemic. On Monday, the analyst reiterated a buy rating and a $2,700 12-month price target for the stock. This target implies 24% upside for shares -- even after the stock's sharp gain on Monday.

The analyst predicts that surging demand for the company's products led to the equivalent of a "Prime Day in March." In addition, the analyst predicts that a trend of consumers sheltering at home during this time may have led consumers who don't normally shop on Amazon to be drawn to the platform's convenience.

While pricey valuation metrics may make Amazon shares may seem expensive on the surface, a close examination reveals that they are still attractive for investors willing to hold for the long haul. Sure, Amazon trades at 95 times earnings today. But it's worth noting that the company's earnings have been soaring. Earnings per share in 2019 was $23.01, up from $20.14 in 2018 and $6.15 in 2017. Helping earnings, Amazon's operating margins have been improving as the company benefits from extraordinary economies of scale. 

Even though the company now has a market capitalization of more than $1 trillion, Amazon's competitive edge over traditional retailers and a continued shift to e-commerce -- a shift that's likely to accelerate during a time like this -- make the stock a buy today. Of course, investors should only buy the stock if they plan to hold for more than five years, as anything can happen with the stock in the near-term -- particularly during these uncertain times. Furthermore, as Amazon is a growth stock, investors should keep in mind that Amazon shares are likely to trade with quite a bit of volatility. Over the long haul, however, the company's aggressive investments in cloud computing and e-commerce should continue to pay dividends in sales growth and margin expansion, rewarding shareholders.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon and recommends the following options: short January 2022 $1940 calls on Amazon and long January 2022 $1920 calls on Amazon. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned, Inc. Stock Quote, Inc.
$113.78 (-3.01%) $-3.53

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/26/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.