Amazon.com, Inc. (NASDAQ: AMZN)
At this time last year, if you would have asked me what I thought about AMZN, I would have told you that at the very least, I’m not impressed. However, throughout the year, we’ve seen quite a bit of good news from Amazon, and to be honest, my opinion has changed drastically. In fact, when it comes to Amazon, I’m incredibly bullish at this point. Today, we’ll talk about why.
Amazon’s Low Margin Model Is Starting To Make A Lot Of Sense
Last year, one of my big concerns with AMZN was its low margin business model. Essentially, Amazon has made a business out of making very little money on sales. That simply didn’t make much sense to me. My biggest problem with this model was Amazon’s service that’s known as Prime. For those of you who don’t know much about Prime, it’s a very simple service. Consumers pay $99 per year to become Amazon Prime members. In return for the payment, Prime members receive free 2 day shipping on several items purchased at Amazon, free streaming television services, and more. At the price for the service, I saw this as an easy way for AMZN to lose money.
As time passed, the vision behind Amazon Prime became apparent. Throughout the year 2015, we learned quite a bit. First and foremost, data came out stating that a large portion of Amazon Prime members spend more than $800 per year on the online retailer’s platform. Also, Amazon Prime creates a rotating door. Users sign up to get free shipping on Prime products. As a result, more manufacturers want to become Prime members to take advantage of the advertising that comes along with it. Then, more consumers sign up to take advantage of more offers, and the door rotates. With the massive amount of consumers that have signed up for Prime and the massive amount of manufacturers that are now selling Prime products, it’s easy to see how this plan has become profitable.
Amazon Web Services Is Incredibly Profitable
As the cloud computing industry becomes a larger and larger industry, more and more companies are getting involved. However, few have made as big of a splash as Amazon. Amazon’s cloud computing service, Amazon Web Services, grew incredibly fast. The company grew to be a $5 billion company before any time at all. Now, speaking with friends in the tech industry, I’m hearing more and more people saying… “I’m going to Amazon Web Services”. The company has created a platform that has taken a leadership role in the industry and that isn’t likely to change.
Amazon’s Growth Outside Of The United States
Amazon is one of the largest online retailers in the United States. However, their business doesn’t stop at the US border. In fact, they are incredibly popular outside of the US, and that popularity is only growing. Recent data surfaced showing that the company is doing incredibly well in India as well. In the month of October, Amazon brought in 30 million visitors in India, making it the most popular e-commerce website in the region for the month and proving growth in the region of 38%.
The Bottom Line
The bottom line here is the fact that Amazon has had an incredible year throughout 2015 and is likely to see strong growth throughout 2016. The company has proven throughout the year that their low margin system is working. Beyond that, we’re seeing exponential growth abroad and incredible movement in the cloud computing industry. With that said, I’m expecting to see great activity out of the stock moving forward.