Amazon (Amazon Stock Quote, Chart, News, Analysts, Financials NASDAQ:AMZN) Prime Days are a week away but it’s the stock that’s currently on sale, according to portfolio manager John O’Connell, who says investors will want to own a piece of Amazon’s innovation pipeline.
Amazon was the clear winner in 2020 as the world turned to online sales to keep consumers happy during lockdown, but while the stock benefitted big time over the mid-year stretch between April and September, doubling over that timespan, who knew there’d be little to no movement in the nine months since?
That stagnancy should be your clue to buy AMZN, says O’Connell, Chairman and CEO of Davis Rea.
“Amazon just keeps adding more services to their Prime membership in terms of movies and developing and delivering exceptionally good services to their customers, endearing them more and more and earning those recurring revenues and generating huge free cash flows,” said O’Connell, speaking on BNN Bloomberg on Thursday.
“And with a strong Canadian dollar and Amazon down around 16 or so from its highs, I think it’s on sale for Canadian investors and they should put it in their portfolios today,” he said.
Amazon is hoping for more of the same when it comes to Prime Days this month, which is scheduled for June 21 and 22 in the US and a number of other countries around the world, while Canada’s Prime Day has been paused for the time being. The last iteration in October 2020 saw record-breaking numbers as COVID-19-related issues pushed Prime Day into October, where the company sold a whopping $10.4 billion in goods, more than its Black Friday and Cyber Monday sales combined.
The company said the October event showcased Amazon’s role in supporting small and medium-sized businesses worldwide, with over $3.5 billion in sales for SMB companies, up 60 per cent from the previous year’s Prime Day.
“Amazon is on track to invest $18 billion this year to help small and medium-sized businesses succeed in its store, and designed this Prime Day to support small businesses even more—including funding a promotion that helped drive over $900 million in sales for small businesses in the two weeks leading up to Prime Day. This Prime Day delivered the two biggest days ever for third-party sellers, nearly all of which are small and medium-sized businesses,” said Amazon in a press release last October.
Along with its success during the pandemic, Amazon has also faced criticism about the health and safety of its warehouse workers, with concerns over proper COVID protection measures. On another front, as a member of Big Tech, Amazon has also faced scrutiny over its privacy and anti-trust practices. This week the European Union has proposed a fine of $425 million to Amazon related to EU data-protection laws which the company has alleged flouted. The EU’s privacy law requires companies to explicitly seek consent for the use of personal data.
But O’Connell says investors should be looking at Amazon’s growth trajectory, which by all accounts still looks great.
“It’s the company that everybody loves to hate but everybody uses it, just like Facebook,” O’Connell said. “This is one of those big technology companies that you accuse of not innovating, but here they are moving on the healthcare space, just like Google, Facebook and Apple.”
“They’re signing up customers and trying to deliver health care to consumers at a lower cost. Obviously, the big story is their online retailing and their cloud computing business [but] now they’re moving in to help solve the problem of expensive health care for consumers and for businesses,” he said.
“People are critical of Amazon not reporting profits and the government is going after them for not reporting profits but actually the government tries to encourage people to invest in their business and that’s exactly what Amazon does. They continue to innovate and provide delightful products and services for their customers and that’s why we think they will continue to be a huge success story,” O’Connell said.
Amazon’s share price grew by 76 per cent in 2020, while so far in 2021 the stock is up three per cent.
Amazon last reported its financials in late April where its first quarter 2021 saw sales jump 44 per cent to a remarkable $108.5 billion while profit hit $2.7 billion, beating analysts’ forecasts on both counts. Free cash flow went from $24.3 billion a year ago to $26.4 billion and net income hit $5.01 per diluted share.
Amazon’s cloud computing wing AWS also delivered strongly, hitting $13.5 billion in sales compared to $10.2 billion a year earlier.
“In just 15 years, AWS has become a $54 billion annual sales run rate business competing against the world’s largest technology companies, and its growth is accelerating—up 32 per cent year over year. Companies from Airbnb to McDonald’s to Volkswagen come to AWS because we offer what is by far the broadest set of tools and services available, and we continue to invent relentlessly on their behalf,” said CEO Jeff Bezos in a first quarter press release.