Amazon (AMZN 0.21%) has been a top performer during the bull market, gaining 44% last year as investors piled into growth players and companies investing in the potentially game-changing technology of artificial intelligence (AI). This tech and consumer goods giant has a long track record of earnings growth thanks to its cloud computing and e-commerce businesses, and it's already benefiting from its AI investment. Last year, Amazon's cloud business reported a $115 billion annualized revenue run rate. So, the company truly has proven itself to be a great stock to own in recent times.
But with questions mounting about the economy ahead and the impact of President Trump's tariffs, you may be wondering if Amazon can weather any potential storm on the horizon. It's too early to say whether the economy will maintain a certain level of strength, weaken, or even slip into recession territory -- but no matter what the economy is doing at a given time, it's always a good idea to consider a stock's "recession-resistant" potential. And some of those players that do have what it takes to manage tough times and go on to grow deserve a spot in your portfolio.
So, is Amazon recession-resistant? Let's look to history for some clues.
Image source: Getty Images.
Amazon's transformation
When considering history, it's important to note that a growth company such as Amazon may not be the exact same player today that it was in the past. For example, Amazon started out as an online bookseller in the mid-1990s, later expanded into other products and businesses, and only launched its big profit driver -- Amazon Web Services (AWS) -- in 2006.
All this means the Amazon of today may handle a recession differently than the Amazon of yesterday. Amazon generates billions of dollars in earnings and has the financial resources to manage a crisis, and that's positive. But, on the downside, the fact that its business is much more complex -- operating a massive global fulfillment network, for example -- than it was in the early days makes it more vulnerable to certain economic pressures such as higher inflation.
NASDAQ: AMZN
Key Data Points
Still, history can offer us a general sense of how a certain type of business has fared -- and has managed -- difficult times. So, let's take a look at Amazon's performance during the past three recession periods.
The most recent was the COVID-19 recession, which was rather short-lived, as it lasted just two months in 2020. As its name implies, it was sparked by the pandemic -- a health crisis that led to temporary shutdowns of businesses and supply chain disruptions.
Here's a look at Amazon's performance around that time, with the shaded bar in the chart representing the recession period.
Amazon's performance during the Great Recession
Before drawing any conclusions, let's consider previous recessions. The next-most recent was the Great Recession, spanning 2007 through 2009, and it was linked to the subprime mortgage crisis and a general housing market collapse.
Finally, let's turn to the bursting of the dot-com bubble, or the tumbling of overvalued tech stocks, which led to a crash in 2001. And the Sept. 11 terror attacks added to pressure on the market.
Here's how Amazon performed at that time, and in the following two years.
A look at all three of these charts shows a similar pattern. Yes, Amazon fell during the recession periods, but toward the end or immediately after the recession, the stock rebounded and went on to gain. That alone offers us reason to be optimistic about Amazon during any potential recession down the road -- but I've got another positive point to add.
Learning lessons from high inflation
As inflation roared higher a few years ago, Amazon struggled with the resulting costs and even reported its first annual loss in almost a decade. Importantly, though, the company took action. The tech giant revamped its cost structure, cutting jobs and streamlining processes across its fulfillment network -- one key change was the transition from a national fulfillment model to a regional one. This move to bring inventory closer to the customer is helping Amazon reduce its cost to serve, and the company says it continues to make improvements in this area.
This revamping of the cost structure puts Amazon, which through history has proven its strength even during a recession, in an even better position to excel. With an improved ability to control costs, Amazon could more easily manage a slowdown and limit the impact on earnings. So, history shows Amazon's ability to advance through the worst of times -- and moves the company has made in recent years have reinforced this, making it a fantastic recession-resistant stock to add to your portfolio.
