Last Updated: May 29, 2022
Amazon is one of the world’s largest online retailers, taking around 38% of the entire US e-commerce market. In 2020, its revenue soared 38% to $386.1 billion.
With this in mind, are you wondering how much does it cost to buy stocks in Amazon? On 17 March 2021, the shares kicked off the NASDAQ trading session at $3,104.97. The price is high, but the value is immense, according to some market analysts and existing investors.
If you want to be a silent partner of Jeff Bezos or just get a retirement portfolio, you should check out how to buy Amazon stock. We will cover all the steps and key consideration points. So read on!
Amazon Company Overview
Before covering the ins and out of investing in Amazon, let’s take a look at the company’s growth story.
History and IPO
Based in Seattle, Washington, Amazon was founded by owner and current CEO Jeff Bezos in 1994. Meant to be an online bookstore, the company started in Bezos’ garage — a similar beginning many of the world’s most successful multi-billion-dollar companies had.
Nobody anticipated the amazing future Amazon would have. But just two months after the launch, the retailer had sold to all 50 states and over 45 countries worldwide, with sales reaching $20,000 per week.
Only a year later, Amazon went public. The company’s initial public offering (IPO) took place on May 15, 1997, going at $18 per share under the Amazon ticker symbol AMZN on the NASDAQ exchange. If you bought amazon.com stock at the time, you would have been a millionaire by now. In May 2020, $10,000 invested in the company during the IPO would be worth more than $12 million.
In the past 25 years, Amazon has had three stock splits. The first two-for-one stock split happened in 1998, and the other two three-for-one and two-for-one were in 1999. In recent years, there has been some speculation that Amazon’s stock might split again, but Bezos has neither confirmed nor denied these rumors.
What is Amazon worth?
Amazon also delivered a record performance in 2020, with annual revenue up 38% to $386.1 billion. Net profit increased by 84% to 21.33 billion. Thanks to this rapid growth, Amazon ranked 2nd on the 2020 Fortune 500 list, right behind its biggest competitor, Walmart.
Bezos’ unconventional business model has continuously left investors and analysts in awe over the last decade. The Amazon stock market performance remained stable even when unexpected events shook peers. In 2001, the company survived the dot-com bubble burst and proved that it’s stronger than anyone thought.
Amazon has also fought many lawsuits over the years, most of them concerning labor and employment laws. Most recently, the company was accused of failing to provide a healthy working environment amid the Covid-19 pandemic. Besides, Amazon is also facing fierce competition, with eBay and Walmart increasing their market share.
But the Amazon stock price has been outperforming the S&P 500 over the years and during the 2020 bear market. This is a clear sign the company handles various situations without a significant dent in its market value.
Amazon during the pandemic
As unfortunate as it may be, Amazon is one of the companies that benefited most from the global Covid-19 pandemic.
Since the coronavirus outbreak, people have been going on shopping frenzies. The flood of online orders propelled Amazon to record sales during the second quarter of 2020. Amazon’s response was very fast, as they immediately launched Project Ultraviolet and spent billions on coronavirus-related investments.
The pandemic is also what helped Amazon’s market value reach the $1 trillion mark in 2021. Consequently, the Amazon stock market value has also skyrocketed in the past year.
Amazon Stock Investment
Before choosing to invest in Amazon stock, make sure to go through some key consideration points, such as:
- How Amazon stock fits into your trading portfolio?
- Can you afford to buy Amazon stock?
- Is it a good time for investing in Amazon stock?
- Will you sell, deposit or reinvest your earnings each quarter?
- What investment approach will you choose — direct investment, mutual fund, or online trading platform?
Should I buy Amazon stock?
Whether you’re searching for fast-growing or long term-investments for your portfolio, Amazon stock falls under both categories.
Amazon does not pay dividends to investors. Yet, short-term gains are possible. Net sales rose 44% to $125.6 billion in the final quarter of 2020. This increase is considered massive regarding the company’s size. It’s hard for an industry behemoth to almost double its net sales in just one quarter of a fiscal year.
While some can benefit from the fast-rising stock, Amazon remains a viable long-term investment, ideal for a retirement portfolio. Analysts expect that the next ten years will be a thriving point for Amazon since it has gained many customers during the pandemic. Most of them will continue to shop online. This change in the way people shop can influence the stock price of Amazon as well, as analysts predict the company’s inflection point is yet to come.
Can you afford to purchase Amazon stock?
On March 17, 2021, Amazon opened the day at $3,073.22, while its 52-week high was $3,552.25, outperforming the S&P 500 and Dow Jones at least three times. The current Amazon stock price is very high because of the company’s fast development and the need to split stock, which hasn’t happened since 1999.
So buying 100 shares of Amazon stock at current prices would cost you roughly $310,000, without commission fees. Can you afford it, and how many shares can you buy?
Who are Amazon’s top investors?
The top three Amazon shareholders are Jeff Bezos, Andrew Jassy, and Jeffrey Blackburn. Bezos owns 11.1% of the stock, making him one of the wealthiest people alive. Currently, he is personally worth more than Nike, McDonald’s, Costco, and almost 50% of Dow Jones.
The biggest institutional shareholder is Advisor Group Inc, with a 6.14% stake in Amazon.
Amazon Stock Investment Options
If you were wondering how to buy Amazon stock directly, the answer is DSPP. Launched in 2019, Amazon’s Direct Stock Purchase Plan or DSPP, lets you invest in the company’s stock without going through a broker, and you can do that by opening an account on Computershare. Keep in mind that when using the system, there are certain fees involved.
You can also choose to purchase Amazon stock through a mutual fund. If you want a larger position in Amazon, you can invest in mutual funds that specialize in tech companies. In this case, you’ll also have the advantage of diversification into other stocks. This option is the safest since your profit does not solely depend on one company but on the entire fund. Should the stock market performance of Amazon lags, your investment can still turn out positive.
Another option is to get guidance from financial advisors, either human or Robo-driven. These can not only help you diversify your portfolio but also give you insight and advice on how, when, and for how long you should invest in a particular stock.
How to Buy Amazon Stock Step by Step
If you are interested in buying Amazon shares through a brokerage firm, take a look at the following steps:
Step 1: Choose a trading platform
As a beginner, you first need to choose a trading service. Explore your options, check the commissions and tools available. Select a platform that suits your investment experience and goals.
Step 2: Start a brokerage account
To open a brokerage account, you need to fill in an application form, providing certain personal data. After verifying the information, the trading platform will let you fund your account.
Step 3: Look for Amazon stock
When looking for the stock, you can use the Amazon ticker symbol — AMZN. The retail giant is listed on the NASDAQ stock exchange.
Step 4: Decide when to purchase
You can buy Amazon shares at the current price or create a limit order and purchase the stock when it reaches a particular level.
Step 5: Check in on your investment
Lastly, make sure you check in on your investment and optimize your portfolio.
Is It a Good Time to Invest in Amazon?
The question that now may prevail is not whether to buy stock is in Amazon, but when to do so.
The AMZN price rose 71% in 2020, which marks its highest yearly increase. Yet, relative to earnings and potential, the shares are fairly cheap, according to The Motley Fool. On an EV-to-EBITDA basis, Amazon is trading at 33.9, below its average historical and median values over the last ten years.
Is Amazon Stock Overvalued?
The Amazon stock symbol has been overperforming the market for several years. Yet, some experts say this is a discount price for the stock, as its brightest days are yet to come.
Let’s take a look at some metrics to understand better why this stock is not overvalued.
The price to earnings (P/E) ratio measures the company’s current share price relative to its earnings per share (EPS). Amazon’s P/E is 73.62, suggesting that investors expect higher growth from the company compared to the overall market.
The price per sales (P/S) ratio shows a company’s market capitalization divided by the annual sales. Analysts prefer to see a lower number, as this indicates how much investors are paying for the stock per dollar of the company’s sales.
If you want to invest in Amazon, it’s worth knowing that its P/S ratio is 4.06 as of March 2021. For comparison, Apple’s is 7.08.
Amazon’s current price/earnings to growth (PEG) ratio stands at 1.49. This can be one of the indicators that the stock may be overpriced. But considering that in the Q2 of 2020, the PEG ratio was 2.97, the trend is decreasing.
In the table below, you can see Amazon’s quarterly return on investment (ROI) and net income since 2018.
|Date||TTM Net Income||Investments & Debt||ROI|
Analyst predictions for Amazon
According to the CNN business survey, 46 analysts predict a median Amazon shares price target of $4,000, with a high estimate of 5,200 and a low estimate of 3,420. The median estimate represents a +28.71% increase from the last price of 3,107.81.
So, is Amazon stock a buy or sell? The current consensus among 51 polled investment analysts is to buy the stock.
Once a garage-based online bookstore, Amazon has evolved into a multinational and multi-billion-dollar company. Its market cap amounted to $1.58 trillion in February 2021. For fiscal 2020, the company’s revenue was just over $386 billion.
Expectedly, such figures have drawn investors to invest in Amazon and thus become owners of some of the most valuable shares on the stock market. Even you can be one of them, now that you know how to buy Amazon stock.
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As of March 2021, there are 503 million outstanding Amazon shares.
Amazon’s market cap amounted to $1.58 trillion in February 2021.
Investing in Amazon through a brokerage firm takes a few straightforward steps:
- Find a suitable online trading platform and open an account there
- Link your bank account and make your first deposit
- Type the AMZN ticker symbol to find the stock
- Place a buy order or create a limit order so that you can purchase the stock at a particular preset price.
To buy Amazon stocks, you will need to do the following:
- Open a brokerage account or invest directly through Computershare
- Find the Amazon ticker symbol by typing AMZN
- Select the number of shares you want to buy
Now that you know how to buy Amazon stock, you’re all ready to execute your first order. Good luck!