Source: PaxForex Premium Analytics Portal, Fundamental Insight
Investors have been increasingly interested in Amazon over the past month after the e-commerce and cloud computing giant announced that it would make a 20-to-1 stock split on June 6.
As we know, stock splits often intrigue investors because they result in a lower price per share, making it technically easier for a wider range of people to buy the stock. But these days, such events are less important, as many brokerage accounts allow investors to buy fractional shares.
More importantly, although shareholders will end up with more shares than they had before, the total value of the company (and the shares of previous investors) will remain virtually unchanged.
However, there are a few reasons why you might want to buy Amazon stock this month, but they have nothing to do with the company's stock split plans.
Most people still think of Amazon primarily as an e-commerce giant, but it's on Amazon Web Services (AWS) cloud computing that the company is making real money.
In 2021, AWS accounted for 74 percent of the company's operating income, even though it only accounted for 13 percent of the company's total revenue. Not only does the cloud business make Amazon a huge profit, but it's also one of the company's fastest-growing segments, with fourth-quarter sales up 40% year over year to $17.8 billion.
That's all impressive enough, but the company's capabilities look even better when you consider that AWS currently has 33% of the $191.7 billion cloud infrastructure market. Microsoft is in second place with a 22% market share, and Alphabet lags with 9%.
In short, AWS is growing fast, very profitable, and a dominant player in the cloud computing market - all indicating the company's long-term potential to continue to capitalize on this market.
Amazon first disclosed advertising revenue as a separate metric when it reported fourth-quarter results in February, and investors liked what they saw.
Ad sales totaled $9.7 billion in the quarter, a 32% increase over 2020. To put that in perspective, Amazon's advertising business officially exceeds YouTube's advertising segment, which was $8.6 billion in the same period.
Before the last report, analysts and investors had to figure out what the company's ad sales were, but now they have a clear picture of a healthy business that's generating massive revenue and growing quickly. According to eMarketer, Amazon's advertising business will continue to shrink Alphabet and Meta Platforms' market share in the coming years and will account for nearly 15% of the digital advertising market by 2023 -- up from less than 12% last year.
While some investors may be excited about Amazon because of the upcoming split, the company's strong position in advertising and cloud computing are much stronger reasons to consider buying the stock this month.
As long as the price is above 2880.00, follow the recommendations below:
- Time frame: D1
- Recommendation: long position
- Entry point: 3032.00
- Take Profit 1: 3360.00
- Take Profit 2: 3569.00
Alternative scenario:
If the level of 2880.00 is broken-down, follow the recommendations below:
- Time frame: D1
- Recommendation: short position
- Entry point: 2880.00
- Take Profit 1: 2715.00
- Take Profit 2: 2527.00
