2 Reasons Amazon Stock Is a Buy and Hold Forever

Amazon stock (NASDAQ:AMZN) may have soared in share price over the years, but more could certainly be on the way for today’s investor.

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There aren’t too many stocks out there that have done as well as Amazon (NASDAQ:AMZN). While it’s gone through several stock splits, over time shares of Amazon stock have absolutely powered through the stock market. It’s now one of the largest companies in the world, which is saying a lot for a company that started off selling books.

But the question now is whether there is still more room to grow? In short: absolutely. And here are the two biggest and best reasons why Amazon stock remains a buy-and-hold forever stock.

Market dominance

Amazon stock has long been a strong company, but it has now simply dominated the market. This has provided it with diverse revenue streams for investors to enjoy. This was recently highlighted during its first-quarter earnings. 

The company’s net sales increased by 13% year over year, with significant contributions from North America, International, and AWS segments. North America segment sales increased by 12%, while International segment sales increased by 10%, demonstrating Amazon’s ability to capture market share globally. Moreover, AWS segment sales grew by 17%, indicating the continued demand for cloud services.

Furthermore, Amazon stock’s dominance in e-commerce is evident through its expansion of selection, fast and convenient delivery, and strategic partnerships with popular brands. The company’s focus on enhancing the customer experience, such as the introduction of shopping events like Prime Day and the launch of grocery subscriptions, strengthens its competitive position in the retail sector. 

Additionally, Amazon’s investment in technology and innovation, particularly in generative artificial intelligence (AI) and robotics, underscores its commitment to long-term growth and operational efficiency. By leveraging AI technologies in various industries, including healthcare, telecommunications, and entertainment, Amazon is poised to capitalize on emerging trends and maintain its leadership position in the market.

Finally, Amazon’s strong financial performance, with operating income increasing to US$15.3 billion and net income reaching US$10.4 billion in the first quarter of 2024, reflects its ability to generate substantial profits while sustaining growth initiatives. This financial stability and profitability provide a solid foundation for long-term investors seeking consistent returns and capital appreciation.

Continued investment

Now we’ve mentioned what the company is already doing, but there is even more on the way for Amazon stock. Amazon’s relentless focus on invention and investment in infrastructure positions it as a frontrunner in shaping the future of technology and commerce. The company’s commitment to developing cutting-edge products and services, such as Amazon Q for software development and Amazon Bedrock for generative AI, demonstrates its capacity for innovation and differentiation in the market.

Furthermore, Amazon stock’s expansion of AWS infrastructure regions and investment in data centres further solidifies its position as a leading provider of cloud computing services. The planned launch of new infrastructure regions in Saudi Arabia and Mexico, and the investment in data centre complexes in Mississippi underscore Amazon’s commitment to meeting growing customer demand and supporting digital transformation initiatives globally.

In fact, the company provided strong guidance for the second quarter as well. Net sales should increase between 7% and 11%, with operating income increasing to US$10 to US$14 billion. This would be up to double last year’s results.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool recommends Amazon. The Motley Fool has a disclosure policy.

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