Just name an investment theme backed by a big idea. Chances are, numerous stocks associated with that theme have managed to soar to the stars, only to fall back to Earth in spectacular fashion. This is the nature of the beast with many investments, especially those tied to hot market trends and sexy growth narratives. But not every play has to be that risky to be rewarding. For example, proven names like Amazon (NASDAQ:AMZN) and AMZN stock are still worth a look in today’s hyper-bullish environment.
Logistics activity on the Amazon site of Vélizy-Villacoublay in France. Packages are sorted by workers on coneyors.
Source: Frederic Legrand – COMEO / Shutterstock.com
Of course, whether that bullish market will endure is currently under question. (Isn’t it always?)
Today, many tech stocks are suffering losses after their pandemic-induced leaps have reached their limits. Now, the first hint of “normal” has many questioning the investment theses that were pervasive in 2020. Plus, some investors just want to take profits — or, they’re afraid of what the future might hold.
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Inflation concerns loom. Claims of a tech stock bubble continue to gain traction. Additionally, a few other bubbles — which alarmists argue are bound to burst — are seemingly growing bigger. Even global political chaos has returned to the headlines (not that it ever left us in 2020).
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However, in a roundabout way, all of this hints at why AMZN stock should still be on your watch list.
Why AMZN Stock Remains Relevant Today
Again, while things are getting back to some sort of normal, they also remain largely uncertain. Thankfully though, at this point, Amazon’s success is essentially “certain” regardless of what’s going on in the world. In fact, the pandemic only managed to solidify its strength.
By securing its leadership position throughout a Black Swan event, Amazon justified its pre-Covid-19 association as a “no-brainer” investment. It’s by no means the same growth behemoth that it was over the past five years. However, in strange times like this, a “sure thing” is often better than a gamble.
AMZN stock has been a sure thing for quite some time now. That’s because many exceptional growth drivers have powered it higher. Although its growth potential was diminishing prior to Covid-19, the company remains a key competitor in numerous hot-topic spaces. Plus, there are still a few promising areas where Amazon can find new growth.
Few companies that dabble in multiple spaces do it well, let alone become leaders in several areas. However, over the past five years, Amazon has quickly become a jack of all trades, from logistics to food provision, healthcare, cloud services, video streaming, artificial intelligence (AI) and gaming. The list is even longer than that — and I’m sure it’s bound to grow even more years from now.
With its tentacles in almost every facet of our daily lives, this company is starting to embody the nightmare corporations that permeate popular Sci-Fi narratives. For better or worse, it’s essentially bound to own the world in some way or another. In fact, you could argue that it already does, given the fact that its soon-to-be-ex CEO Jeff Bezos is the richest person on Earth.
If you ask me, owning a part of the world makes a lot of sense in the long run. And I’m not alone in that assertion.
Is Amazon a ‘Sure Thing’ Beyond 2021?
One recent UBS report anticipates that we’re entering a reflation period. UBS offers the following advice to investors in phases like this: “strategically, investors should pay less attention to market timing and more to the long-term picture. In times of uncertainty, investors should take advantage of volatility to enter markets.”
Although the report goes on to identify many other spaces bound to benefit (like oil and other commodities), the focus on long-term success reflects my thoughts on AMZN stock.
We’re definitely in uncertain times right now. We don’t know what the “new normal” truly entails. And, while “70% of investors are optimistic about stocks over the next six months,” there are still plenty of naysayers who think we’re headed toward doom.
Regardless of what you believe, the long-term case has always been a strong point for AMZN stock.
Two Long-Term Catalysts Stand Out
Here’s a quick reminder of why that remains true, even to this day. Hint: it’s not just about e-commerce these days:
Amazon’s digital ad efforts continue to show promise as a next-generation pathway for growth. Analysts forecast that Amazon will beat-out Facebook (NASDAQ:FB) and Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) here in the long run. This was part of the bullish case for AMZN prior to Covid-19 and it’s expected to continue growing at an impressive rate. In fact, analysts estimate that its digital ad revenues will climb 33% in 2021 and 29% in 2022. While that growth is less than the 39% seen in 2019 and 41% last year, it’s still significant. That’s especially true given that the company’s taking on seemingly impossible-to-topple leaders in the space. The strength of this catalyst is even more impressive considering that “[w]hen looking for a product, about half of U.S. adults start their search with Amazon.”
Its efforts in the healthcare space are finally gaining more steam. For example, AMZN’s telehealth program Amazon Care expands to other firms this summer (along with all Amazon employees based in the U.S. and their families). This takes direct aim at pandemic winners like Teledoc Health (NYSE:TDOC), which also stand to benefit greatly from the increasing shift to remote healthcare.
These aren’t the only two catalysts that support the bullish case for AMZN stock, either. Plenty of other facets to Amazon’s business continue to show great promise. All are worth further examination. And the cherry on top — sour as it may be — is that the pandemic was a positive catalyst for this company in many ways.
In other words, the potential for Amazon to lead multiple industries is stronger than ever. That makes it a buy on any dip, as well as a general go-to investment in these uncertain times.
The Bottom Line on AMZN Stock
Out of all the major tech stocks, Wall Street analysts have the most faith in AMZN stock, with an average of 18% projected 12-month upside. That tops both Apple (NASDAQ:AAPL) and Facebook, which are tied for the No. 2 spot with 13% projected upside.
Although an 18% gain might not sound so hot compared to your favorite Reddit stock, it’s still very impressive. That’s especially true considering the mammoth size of Amazon.
Some investors are concerned about tech stocks more broadly. They should be. The valuations for many have gotten out of hand over the past year. But even so, many analysts don’t count Amazon among the tech stocks that are caught in the bubble. Instead, they expect AMZN to stay strong.
At the end of the day, it all comes down to this: if you’re trying to make a level-headed choice in this increasingly whacky market and world, Amazon stock is a solid pick.
Robert Waldo is a web editor for InvestorPlace.com. On the date of publication, he did not hold a position (either directly or indirectly) in any security mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
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