Considering Investing in Amazon shares from India? This question has always piqued the interest of several investors. Amazon has been an unstoppable giant for several years. It has been an e-commerce behemoth that has caused shivers in many of its competitors. However, it might come as a surprise to discover that Amazon is much more than an e-commerce giant; we all use it daily.
Amazon is an online, brick-and-mortar retailer, a cloud services provider, and a marketing firm all rolled into one. Amazon Web Services (AWS), its cloud computing business, generates the bulk of its profits from AWS.
In the second quarter of 2022, revenue from its cloud services rose 33%, generating a revenue of $ 19.74 billion. Additionally, AWS leads the $ 200 billion market as the world’s largest cloud infrastructure provider with 34% of the market share, followed by Azure which holds 21%, and Google Cloud, which holds 10%.
How has the Amazon share performed in 2024?
However, the company exposed itself when it reported an unexpected first-quarter loss that fell far short of Wall Street’s expectations. The price of the stock had risen above $185 in 2021. Amazon had experienced tremendous revenue and profit growth during the early stages of the pandemic, though the pace was beginning to slow. Amazon stock fell after the company reported a significant loss in the first quarter of 2022, which was compounded by a revenue forecast that fell far short of expectations.
Amazon, however, attributed this poor outlook too, among other things, the pandemic, inflation, and Russia’s invasion of Ukraine. Nonetheless, Amazon’s stock fell by 14% to $124.28 in April 2022, the most since October 26, 2011, when it fell 12.66%.
The year 2022 has been a tough year for Amazon stock prices. Amazon (AMZN) continued to perform poorly, as of June, 2022, the stock is down about 28% year to date and nearly 38% at its low. Surprisingly, Amazon’s stock price increased after the company reported second-quarter earnings on July 28 that, while missing earnings estimates, exceeded revenue expectations across the board. In response, Amazon’s stock increased by 10.4%.
As of July, 2022, revenue has increased by 7% to $121.2 billion, exceeding the $119 billion forecast. It lost 20 cents per share, compared to a 12-cent profit predicted. Even so, its Amazon Web Services division, as well as Amazon’s third-quarter forecast, outperformed expectations. Amazon shares are down from their peak, So is buying Amazon shares in India a good idea right now?
As previously stated, the Federal Reserve is raising interest rates while consumer spending power is being eroded by inflation. That is not a promising sign for Amazon or any other company. Rising inflation diminishes purchasing power while also increasing operational expenses. Sellers may find themselves with overstocked inventory levels and waning margins while customers trimmed back on their purchases. Inflation is a problem that cannot last long, governments globally enact policies to bring inflation down. Amazon has significant long-term opportunities regardless of the short-term pain of inflation. Let us further understand why Amazon could be a good opportunity.
Why should you consider investing in Amazon shares in India?
- AWS is the leading player in the global cloud services market:
According to Gartner, a technology research firm, more than 85% of organizations will have adopted cloud-native architectures and technologies by 2025. Technology companies can significantly reduce capital expenditures by implementing a cloud-based infrastructure-as-a-service model that includes cost-sharing. Additionally, the cloud enables businesses to quickly scale up or scale down storage and processing capacity, resulting in increased business efficiency.
As we established above, AWS is the leader in global cloud services. With enterprises focusing on a cloud-first strategy and shifting their data and resources from on-site networks to hybrid or public cloud as a long-term strategy, AWS appears well-positioned to withstand recessionary pressures. This is especially evident when we consider that AWS’s sturdy trading volume with written contracts with customers was valued at $88.9 billion as of March 31, 2022.
- Increasing advertising momentum:
Amazon’s advertising services segment increased revenue by 18% year on year to $8.76 billion in the second quarter of 2022. The company is well-known for sponsored products and search listings that can be linked to the point of purchase on its massive e-commerce marketplace. Media placements that can be directly linked to sales results may become more appealing as marketers face budget cuts and consumers become pickier about their spending.
According to Amazon finance chief Brian Olsavsky, people are advertising when customers have their credit cards out and are ready to make a purchase. Amazon accounted for 50% of all retail media ad spending in the January-May period this year, according to new Standard Media Index (SMI) data, followed by Walmart.
- Current low valuation:
The company’s valuation has dropped to its lowest in seven years due to Amazon’s biggest drop since the financial crisis. In case of a future recession, it is important to note that AWS, Amazon’s primary source of cash flow, is recession-proof, and cloud computing saves money for businesses.
Furthermore, analysts predict that Amazon will outperform almost all Wall Street growth investment stocks in the long run, including the Nasdaq, aristocrats, and S&P 500.
As a result, the company’s stock’s current inflated downturn may present an opportunity.
- Steady Amazon Prime subscriptions:
Amazon Prime has nearly 150 million members in the United States alone, with a total of 200 million worldwide, and subscribers are rapidly renewing. In addition, 28% of Amazon shoppers complete their purchases in three minutes or less, and half of all purchases in less than 15 minutes. This resulted in a $126 billion value creation figure among Amazon Prime members in 2020, compared to average store trips that take an hour. According to CIRP, the 30-day conversion rate for Prime was 69% as of March 31, 2021, rising to 93% in the first year and a near-automatic 98% after the first year.
What are the things to consider before making an investment inAmazon?
- Labour Intensive model:
Amazon hired approximately 500,000 people in the last year, increasing its global workforce to more than 1.2 million, a 50% increase over the previous year. High employee turnover rates, coupled with a major national shortage of workers, also ended up causing issues for the business in recent months.
Amazon’s business model faces long-term challenges due to the current labor shortage. According to experts, the United States is currently experiencing significant labour market tightness due to continuing pandemic health concerns, an aging working population, and workplace changes that have caused workers to reconstruct their way of life. It also serves as an origin of wage inflation pressure, which would be anticipated to last for some time unless the Fed takes extreme steps.
Nevertheless, the supply of labour is not endless. With Amazon’s high employee turnover rate, the business would take three decades to deplete the country’s current low-wage labour pool. Consequently, the company will almost certainly have to actively look for a way to resolve labor uncertainty.
- Reliance on AWS:
Amazon’s cloud business continues to thrive. On the other hand, Amazon’s core e-commerce business is still struggling, with online sales no longer thriving as they were during the Covid-19 shutdown. The online store segment of the company fell 4% year on year. Physical-store sales increased by 12% over the same period last year.
To sum up,
Amazon is a massive company with several growth engines ensuring future excellence. The company spends well enough on research and development on products and technology that will be drivers for future growth. The overarching point is that since prices have dropped to reasonable levels due to inflation and other macroeconomic factors, it could be an excellent time to consider investing in Amazon and take advantage of the dip. Wondering how to invest in Amazon shares from India? Investors who wish to invest in Amazon shares from India can do so through the simple and hassle-free Stockal App. Stockal allows the user to directly invest in Amazon stocks, funds, and ETFs that hold Amazon stock. An investor can own amazon shares in India from the comfort of their home.
