DotBig: Amazon stock price prediction
Amazon is the biggest online platform in the world oriented toward selling goods of mass demand worldwide. Its shares have been publicly traded since 1997. As of today (July 14, 4:00), they are valued at $110.40, which is 34% lower than the year before. The declining price is caused by the impact of the inflation and logistics issues that occurred within these 12 months. Regarding this, will you consider Amazon stock a good asset for a long-term deal? Here’s the forecast by DotBig.
Benefits & Drawbacks of buying Amazon papers
In spite of the economic recession and increasing concerns about logistics issues, Amazon remains one of the most competitive players in the retail industry. We might think of the following advantages of investing in the AMZN stock:
- It provides the best cloud services for online sellers. Amazon owns AWS. This is one of the most advanced cloud services highly appreciated by online entrepreneurs. Currently, AWS takes more than 30% of the cloud computing market.
- Amazon benefits from the advertising. Amazon is the website with one of the biggest traffic in the USA. It takes huge advantage of advertising, even though it brings only around 6% of total revenue.
- The AMZN is undervalued. Today, this asset offers a very attractive entry-level for investors. Because of the big share of cloud computing revenues, we should compare it with other cloud giants. Compared with them, Amazon is traded at a discount.
While two reasons seem quite considerable, we cannot ignore the negative tendencies as well. There are two aspects that might potentially affect the earnings of the business:
- The fact that more than 70% of the operating income relies on AWS makes buying Amazon stocks risky. The declining trend may play a bad trick.
- The company is exposed to higher wage inflation because of the significant number of employees and the upcoming economic recession.
What to expect from the future performance of the company
The AMZN stock is considered to be a good long-term investment mainly because of the growing number of entrepreneurs who are going to switch to cloud services. They make businesses more efficient by decreasing the time necessary for data processing and increasing storage capacity. According to the experts’ prediction, 85% of businesses will switch to cloud by 2025.
Amazon might increase earnings through advertising as well. In 2021, the company generated over $31 bln, while in two years it’s predicted to increase advertising revenues up to $39.45 billion.
Last but not least, Amazon makes more than $20 billion from subscription fees annually. In 2021, it had around 150 million Prime subscribers in the US only. By the end of 2025, this number is expected to grow up to 168 million users.
We consider the AMZN stock is a good long-term investment. Its cloud computing services, bringing the biggest share of total revenue, are quite competitive and popular among online retailers. The number of sales of Amazon sellers is growing. More and more people subscribe to Amazon services, contributing to its increasing earnings. That’s why, despite the annual decline in share price, we expect the stock to grow.