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Is Amazon a Recession-Resistant Business?

By Matthew Frankel, CFP®, Toby Bordelon, and Danny Vena – Updated Dec 20, 2021 at 12:47PM

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Would the e-commerce giant hold up well if the economy had a downturn?

Amazon (AMZN -0.82%) has grown rapidly for the past quarter-century, and that includes two pretty deep recessions. In this Fool Live video clip, recorded on Dec. 6, contributors Matt Frankel, Toby Bordelon, and Danny Vena discuss whether Amazon is still a good stock to own during a recession now that it's a massive tech and e-commerce powerhouse. 

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Matt Frankel: This is Amazon, Danny. Why do you think Amazon would hold up so well in a tough market?

Danny Vena: Again, I went back and looked at, if we look at what happened last year, when we had a lot of people who all of a sudden we're not as likely to congregate at stores. A lot of people got into the habit of buying things online. Amazon is the biggest provider of e-commerce services in the world. It's the biggest provider of e-commerce services in the United States. The numbers vary depending on who you talk to, but anywhere between 35% and 45% of the U.S. e-commerce market. It's ridiculously high.

I think that people will do what they have done before with some of the discount retailers. They will go on Amazon and they will look to find the best deal that they can find on the same products that they would be buying online anyway. I don't think buying is going to stop. It might slow and I think Amazon has a pretty good shot at retaining its customers in the event of economic uncertainty. We saw that last year. In fact, growth for Amazon shot up to levels that we hadn't seen in several years. But again, that was the result of the pandemic, so it's not really an apples-to-apples comparison.

But I think that Amazon will continue to hold the vast majority of e-commerce growth, of e-commerce sales in the United States. And as a result of that, I think even if there is economic uncertainty, if there's a recession, if there's a downturn, I think Amazon's business is going to hold up well, and its sales are going to hold up well. And that's why I ranked it as high as I did.

Toby Bordelon: I was right there with you, Danny. I think I was like one notch below you in No. 3 [out of eight large cap stocks]. But, yeah, I agree with what you're saying here on Amazon. I think it's going to hold up well in a recession. I think in a downturn, too, because they get hit by a lot of different competitors and these competitors think, "I'm going to sell this, maybe people go back." I think that's less likely in a downturn. You're going to see less competition.

I also think that what Amazon has done over the last couple of years in terms of massive investments in its supply chain and its distribution network to beef up would give it a leg up, when other people might be struggling a little bit. They can continue to offer that quick delivery and just beat a bunch of other companies at attempting to do what they're doing. Then you go back to the whole, like, Amazon Web Services stuff, more on the corporate side, but a similar argument with Azure could apply there, in terms of maybe growth slowing but people unlikely to stop using it, because it's so entrenched.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Danny Vena owns Amazon. Matthew Frankel, CFP® has no position in any of the stocks mentioned. Toby Bordelon owns Amazon. The Motley Fool owns and recommends Amazon. The Motley Fool recommends the following options: long January 2022 $1,920 calls on Amazon and short January 2022 $1,940 calls on Amazon. The Motley Fool has a disclosure policy.

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