Apple Inc’s current woes notwithstanding, it’s unclear whether the tech gloom that finished off 2018 is now a thing of the past.
But with its sheer dominance of the e-commerce space how can you bet against a company like Amazon (Amazon Stock Quote, Chart NASDAQ:AMZN)? You can’t, says portfolio manager Chris Stuchberry of Wellington-Altus Private Wealth, who argues that everyone should have a bit of AMZN in their portfolios.
Amazon’s share price experienced a sizeable jump yesterday to open the new year in trading, rising five per cent as US markets started 2019 on a slightly higher note. But the deluge of October and onwards can’t be far from tech investors’ minds. After reaching US$2,000 and cresting over $1 trillion in market capitalization last September, Amazon’s stock went through its worst quarter in ten years, losing 27 of its value as part of a broader tech selloff that began in October.
But Stuchberry says the broader trends in both retail and tech in general should give investors little cause to doubt Amazon.
“You have to look at Amazon as one of those juggernauts that to a certain extent almost has to be in your portfolio, and the primary reason is that we all know that the future is online and from an online sales perspective, they’re ten times their nearest competitor,” says Stuchberry, to BNN Bloomberg.
“They also have a massive lead in Amazon Web Services,” he says. “And while they’re doing that, rather than put their hands in the air and take a break they’re slamming their foot on the accelerator, and that’s really important.”
“A simple example is that Netflix exists on Amazon servers, that’s how it’s done,” he says. “We own Twilio and it exists on ASW servers. Many of these technologies exist because [Amazon] has built that ecosystem years ago to power it.”
Amazon last reported its quarterly financials in late October when it posted earnings of $5.75 per share, beating analysts’ estimates at an average of $3.14 per share. But the stock plunged ten per cent on revenue that came in below expectations, along with a fourth quarter revenue guidance that fell below consensus. Amazon will next report its earnings on February 7, where the e-commerce giant’s performance over the holiday season will feature prominently.
“You’ve got these bricks and mortar retailers just vanishing left, right and centre and trying to salvage something on a Sears,” says Stuchberry. “It’s because [Amazon] got the secular theme right and they got the disruption right.”
“And so it’s really crucial for investors to think, okay, is this a moderate entry price — because you’re never going to get a perfect entry price on some of these stocks — but it was $2,000 and it’s $1,500 now, so maybe you might want to own a couple of shares,” he says.
Disclosure: Cantech Letter’s Nick Waddell owns shares of Amazon