How to invest in Amazon and buy AMZN shares
Amazon is a multinational technology company with headquarters in Seattle, United States. While Amazon became a well-recognised brand due to its online marketplace with the same name, the company's meteoric growth has allowed it to expand in various other fields - from cloud computing to satellite internet and autonomous vehicles.
Amazon.com, Inc. was listed on the NASDAQ after its initial public offering in May 1997, with the ticker AMZN.
Are you looking to buy Amazon shares? Or are you anticipating a decline in the share price and would like to utilise CFDs for this opportunity? In this guide, we will explore how you can profit from price movements in the share price of Amazon in either direction and provide you with a better understanding of Amazon stock.
Table of contents
- Company overview
- How to buy Amazon shares (AMZN)
- How to invest in Amazon
- Amazon stock price
- Amazon market capitalisation
- Is it a good time to buy Amazon stock?
Company overview
Amazon was founded by Jeff Bezos in 1994. The company was initially called Cadabra Inc. and was operated out of Bezos' garage. He changed the company's name shortly after founding the company, and it has been known as Amazon since then.
Amazon.com was launched as an online bookshop, but after its IPO, it quickly expanded to selling music and videos. In the following years, amazon.com would become an online marketplace for a variety of products.
The e-commerce company managed to become profitable for the first time in 2001, shortly after the dot-com bubble burst that caused many internet companies to perish. Amazon became more resilient and expanded its business, launching Amazon Web Services (AWS) in 2002. Today, AWS is one of the key drivers of growth for the company.
To put Amazon's meteoric rise into perspective, let us look at some key figures:
- In 2010, Amazon had 33,700 employees worldwide. By the end of 2020, this number increased to almost 1.3 million worldwide.
- In 2010, Amazon achieved a net revenue of $34.2 billion. 10 years later, the company reported a net revenue of $386 billion for the year.
While Amazon is famous for its online marketplace, its list of products and services grew exponentially in the past decade. Some of the major ones are:
- Amazon Fresh - a grocery service selling perishable and nonperishable food products.
- Amazon Prime - a membership offering free shipping on eligible products for a flat fee.
- Amazon Video - streaming of movies and TV shows.
- Kindle - an e-reader product.
- Amazon Studios - developing TV shows and movies.
- Amazon Drive - a cloud storage application.
- Amazon Web Services - cloud computing web services.
The list of companies owned by Amazon is quite long, so we will present you with the most important ones:
- Whole Foods is an organic grocery chain and fully owned by Amazon. Most of its shops are located in the United States and a few are operating in the United Kingdom.
- Zappos is an online footwear and apparel seller. The company was acquired by Amazon in 2009 and marked one of the first major expansions outside of its traditional business.
- Twitch is a live-streaming service that launched in 2011 and was acquired by Amazon in 2014. It remains one of the most popular live-streaming services for video games in the world.
- Zoox is a company focusing on developing autonomous vehicles.
In May 2021, Amazon announced it intends to acquire MGM - a major media company - but the sale is yet to go through.
How to buy Amazon shares
If you are interested in buying Amazon shares then follow our simple steps below:
Step 1: Choose a broker
The first step would be to pick the right online broker. Ideally, you want to choose a regulated, reputable broker that offers commission-free trading. The money you save from commission-free trading can add up quite quickly if you are an active trader.
Depending on what type of trader you are, the trading platform can also be an important factor. Day traders who often use technical analysis might require an advanced platform with sophisticated charting tools. On the other hand, long-term investors could feel comfortable managing their portfolio simply from the broker's mobile app.
Step 2: Decide how much you want to invest
After you have chosen your broker you need to decide what your budget is and how much you will spend on the Amazon shares. Trading share CFDs gives you the ability to use margin. This means you only need to put up a small percentage of the full value of a trade in order to open the position.
Step 3: Review Amazon's stock performance and potential
Before making an investment decision it's wise to do some research into the company's financials, future outlook, and current performance.
Start by conducting a fundamental analysis and review of the company's financial statements, business model, corporate governance, competitors, and other information.
Make sure to also consider technical analysis when reviewing the stock.
Step 4: Choose how you wish to invest
There are two direct ways of buying Amazon shares:
- Physical shares, which is a popular method for long-term investors
- Share CFDs which give you additional flexibility as you can short-sell the stock and use leverage
Some long-term investors choose to make use of both options - holding physical shares as a long-term investment and making use of the underlying CFD to profit from a short-term decline in the share price.
Another way to trade Amazon is through index trading. One such index is the NASDAQ 100, where Amazon is a major constituent. The NASDAQ 100 is generally available as a Cash CFD or a Futures CFD. Cash CFDs have lower spreads and are more suitable for short-term traders, while Futures CFDs are popular amongst position traders as no swap fees will be charged.
How to invest in Amazon
Buying Amazon shares directly is not the only way to invest in the company. Many investors might already own Amazon shares without being aware of it. Amazon is a major constituent of the NASDAQ index, and as such, many popular ETFs also have exposure to it.
Some popular ETFs that include Amazon shares in their holdings are:
- ProShares Online Retail ETF
- Vanguard Consumer Discretionary ETF
- Invesco NASDAQ Internet ETF
- iShares Global 100 ETF
- iShares S&P 500 Growth ETF
Major mutual funds with notable exposure to Amazon are:
- Vanguard Total Market
- SDPR S&P 500 ETF
- Fidelity 500 Index Fund
- Vanguard 500
- Invesco QQQ
For example, Amazon shares make up 7.82% of holdings of the QQQ ETF, which is one of the largest and most popular ETFs worldwide with more than $200 billion USD under management. The ETF has delivered an annualised return of 23.10% over a 10-year period.
Amazon share price
Amazon went public in May 1997. The initial public offering (IPO) was priced at $18 per share.
If you had invested $1,000 in Amazon's IPO back in 1997, your investment would be worth over $2 million now. Not too bad!
Even if we take a more realistic example - $1,000 invested in the summer of 2011 would have been worth almost $18,000 by the summer of 2021 for a cool return of 1700% percent. The annualised ROI would therefore be 33.51%.
Let's have a look at Amazon's historical stock price movement:
- On December 31st, 2021, Amazon closed at a price of $3,408.
- Its 52-week low stands at $2,881, while its 52-week high stands at $3,773 (which is also the current all-time high).
Amazon market cap
As of January 2022, Amazon has a market capitalisation of $1.585 trillion, making it the world's 5th most valuable company measured by market cap.
Amazon's market cap has been rising steadily over the past few years. The pandemic gave the company a massive boost with online sales surging.
Amazon's market cap stood at $1 trillion at the beginning of 2020 and increased to $1.6 trillion within one year. It stagnated during 2021 as concerns over underperforming results and rising costs weighed on the stock.
How many shares of AMZN stock are there?
Amazon has currently 507 million shares outstanding, out of which 456 million are floating. As of December 2021, the number of shares shorted stood at 3.57 million, which represents 0.82% of the shares outstanding. This is higher than some of the other tech giants such as Apple and Alphabet.
What percentage of Amazon is owned by insiders or institutions?
13.36% of Amazon shares are being held by insiders, while 59.27% are being held by institutions.
Jeff Bezos is the company's largest individual shareholder, owning more than 10% of outstanding shares.
Amazon's largest institutional shareholders are Advisor Group, Vanguard Group, and BlackRock.
Does AMZN pay a dividend?
Dividend payments have become more common in the technology industry in the past few years. However, Amazon remains to be one of the major tech giants that so far haven't paid out any dividends yet. Instead, the company continues to reinvest the cash back into the business.
Will Amazon ever start paying out dividends? At some point, Amazon will mature and might reconsider its strategy, as did Apple for example. There are no indications though that this will occur in the near future, so investors will continue looking at it as a growth stock rather than a dividend stock.
Can Amazon shares be traded pre-market and after-hours?
Amazon is listed on the NASDAQ exchange and the regular trading hours are 9:30 AM to 4:00 PM.
Investors have the ability to trade in the pre-market (4:00-9:30 AM Eastern Time) and the after-hours market (4:00-8:00 PM Eastern Time).
However, as participation from market makers is voluntary, liquidity could be lower than usual during these sessions. The price action might also be more erratic.
Is it a good time to buy Amazon stock?
In 2021, Amazon shares underperformed against its big tech peers and disappointed many investors. It posted a return of only 2.4% for the year, while the NASDAQ 100 saw a return of more than 26%.
What is behind the underwhelming performance?
Investors are particularly concerned about the large increase in costs driven by a very tight labour market in the United States. AWS remains a key driver of growth, but other major Amazon segments have seen a decline in profits.
It is not just the labour supply shortages that are causing Amazon headaches, the company is also facing increased wage costs and global supply chain issues.
This brings us back to the original question - is it a good time to buy Amazon shares?
Tech stocks had a bumpy start to 2022 as investors are facing tighter financial conditions. Nevertheless, Amazon is slowly turning into a mature company with a lot of cash on its books and might therefore weather the storm better than some of the other major tech companies. Amazon will also start to benefit gradually from the pandemic-related investments it made over the past two years.
Let's have a look at what the charts are signalling
The daily RSI suggests that Amazon has entered oversold territory. Investors will be keeping a close eye on the psychological support level at $3,000. A breakout below this level could lead to momentum selling and intensify the pressure on the stock in the near term.
AMZN is likely to find strong support ahead of $2862, which is the September 2021 low. A rebound from there could take the stock back to $3,000, where AMZN bulls stand the chance to regain the upper hand.
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This information is not to be construed as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product, or instrument; or to participate in any trading strategy. It has been prepared without taking your objectives, financial situation, or needs into account. Any references to past performance and forecasts are not reliable indicators of future results. Axi makes no representation and assumes no liability regarding the accuracy and completeness of the content in this publication. Readers should seek their own advice.
