How to Invest in Amazon Stock and Earn Money?
Amazon is the world's second-largest retailer today, only behind Walmart. The company's meteoric rise has seen it become one of the biggest commerce giants ever in terms of revenue. In 2022, it recorded over $330 billion in total revenue. Analysts expect the company to become the outright largest retailer in the world by 2024.
Amazon's growth has seen its stock price become one of the most attractive options for investors, with more people exploring diverse ways to tap into the company's growth. This post covers how you can invest in Amazon stock and profit from its growth (or decline).
Amazon Stock Features
Amazon is the second largest online retailer.
The company also offers a range of web, digital entertainment, and cloud services.
The stock will remain one of the best performers due to the company's versatility.
Amazon started out as a bookselling company on July 5, 1994. Founder Jeff Bezos started the company in his garage, but it's fair to say that the company has come a long way since then. Over the last three decades, the company has pivoted multiple times, snagging up other smaller businesses to transform into the behemoth it has now become.
Two key years in Amazon's history were 2005 when the company launched the Amazon Prime service, and 2006 when it launched the first selection of Amazon Web Services (AWS) offerings. Since then, the company has made giant strides in e-commerce, cloud computing, artificial intelligence, and digital streaming.
On the e-commerce front, the company's product range and inventory cover everything from clothing and electronics to furniture and pet supplies. The company now has data centers and fulfillment centers around the world.
The company’s revenues hit $514 billion in 2022.
Amazon stock (AMZN) remains a good choice for investors because it serves a significant chunk of the retail sector which drives economies around the world. An investment in the stock will most likely yield above average returns over the medium to longer term.
Direct market access | Deal on rising and falling market | 24-hour trading | Limit and stop-loss for every trade
Amazon Stock Splits and How It Benefits Investors
Amazon listed its stock in May 1997 at $18 per share. Since then, the company has carried out several stock splits to bring the share price down to levels that will be more affordable for the average investor.
The first split was a 2-for-1 split on June 2, 1998. The second split was a 3-for-1 split on January 5, 1999. The third split was another 2-for-1 split on September 1, 1999. After two decades of no split, the company launched a 20-for-1 split on June 2, 2022.
With these splits, it means that one Amazon share bought on the listing day has now turned into 240 shares. The listing price of $18 per share in 1997 will amount to around $0.075 per share today. This doesn't affect the investment negatively.
Amazon’s stock splits are beneficial for investors in two major ways.
A stock split gives potential investors on the sidelines due to a high stock price an opportunity to buy shares. Therefore, a stock split often leads to increase in demand for the share which usually leads to a rise in the stock price.
Amazon’s share price soared after each stock split, giving investors more returns on the investment.
Since stock splits lead to more demand, it’s easier for investors looking to sell their shares to find buyers and cash in on all or some of their investment. Amazon investors right now can relax now knowing that they can sell their shares whenever they want.
Amazon Stock Price History
Amazon has been one of the strongest-performing tech stocks since listing more than 26 years ago. Today, the stock trades at $129.96 per share.
Amazon Stock Price (Source: Mitrade)
Amazon stock reached an all-time high price of $186.12 per share on July 08, 2021, off the back of the COVID-19 pandemic. During this period, there was a rise in e-commerce traffic as people had to change the way they lived to adapt to the lockdown restrictions in place.
The lifting of COVID-19 lockdowns, the performance of the company's other investments, inflation, and other external factors have all combined to lower the stock price by more than 40% from the highs.
Over the last year, the average price of the stock is 109.78.
The Future of Amazon Stock: Will Price Rebound to $186.12 per share?
If you're thinking about how to invest in Amazon and earn money, you'll definitely want to know if buying now is a good idea.
Is Amazon a good stock to buy? The company's fundamentals mean it's a certain yes. It's a good idea to overlook the short-term dip for the following reasons.
The Company's Performance Tracks Economic Growth
Over the years, amazon's business performance has shown some cyclical tendencies. It grows when the economy is in expansion and contracts when there's a recession.
During periods of economic growth, people are more likely to ramp up consumption and purchases boosting Amazon's e-commerce side of things. More businesses will be happier to complete the transition to AWS cloud services. When the economy is weak, the reverse is the case.
While Amazon's stock might currently be under pressure from the current economic reality, it's important to remember that stronger expansions always follow periods of economic contraction, especially in the U.S. market, which accounts for more than 43% of the company's total revenue.
So, when the inevitable next wave of expansion hits, Amazon will be there to profit, and so will holders of the stock.
The Rise of AI Can Drive Growth
Amazon has shown over the years that it's always able to reinvent itself and take advantage of new opportunities. Currently, AI is all the rage, and Amazon's economic strength and huge market share put them at a significant advantage over other players in the crowded space.
They have already set the ball rolling through projects like Bedrock, and they have plans to implement a chatbot in the online marketplace to help users find products faster.
The Company's Advertising Business Is a Major Revenue Driver
Due to Amazon's sheer size in the e-commerce space, it's no surprise that it has become a top player in the digital advertising world. Sellers in the marketplace can pay for more visibility to drive revenue.
Amazon's return from its advertising revenue is around 10% of its total revenue. But if the growth rate is anything to go by, then advertising will become an important source of growth in the near term.
So, is Amazon a good stock to buy? There's an element of uncertainty with investing but looking at the above details; it's hard to see how anyone can argue against a long-term investment into the platform.
The Risks of Investing in Amazon Stock as a Way to Earn Money
No stock is without downside risks. Some of the major concerns to consider as you weigh up the prospects of buying Amazon stock include the following:
Wild fluctuations in growth rate and performance. Amazon’s operations are influenced by economic conditions around the world. Any weakness in the US or global economy will lead to a decrease in growth and revenue.
Risks associated with international operations. While Amazon is undoubtedly a force in Western markets, it’s still relatively inexperienced in certain international markets. It’s exposure to some of these markets is also subject to certain risks including political upheavals, nationalization, labor laws, shorter receivable and payable cycles, restrictions of product distribution.
Lack of Redundancy. Amazon’s operations could be severely damaged by disasters like earthquakes, floods, and fires. This is in addition to the ever-present risk of cyberattacks damaging the company’s reputation.
Fierce Competition. Amazon has competition in all the industries it’s operating in, from retail and e-commerce to web services and digital content. Some of these competitors can corner more market share through aggressive pricing, better technology, and more leading to a decline in Amazon’s revenues.
Before you invest in Amazon, it’s important to weigh these risks to ensure you’re making the right choice.
Ways to Buy Amazon Stock and Earn Money
There are 2 major ways you can buy and sell Amazon stock:
Through Stock brokers
Stockbrokers were once the only way to buy and sell stocks in the past. Unlike decades ago, most of the biggest names now have apps or website platforms where you can sign up, fund your account, and buy your preferred stocks. So, you can buy Amazon by going to your local stock broker or by signing up on their online page and funding your account.
The main advantage of buying and selling Amazon stock through stock brokers is that you actually own the shares. you can hold them for as long as you want, and benefit from dividends, splits, and voting rights.
If Amazon’s stock price appreciates as expected, you can sell it for a profit. However, if the price continues to dip, the value of your investment will also decline. So, your chances of earning money as an investor in Amazon will lie solely in Amazon’s ability to continue growing as a company.
And you have to pay commissions, fees, and taxes. These can eat into your profits, especially if you trade frequently or in small amounts.
Through CFD Brokers
Many brokers offer Contracts for Differences in shares. The key characteristic of this type of investing is that you don't actually own any Amazon stock, but you can still make money from the price movements. It is a type of derivative that allows you to speculate on the price movements of an underlying asset.
The main advantage of CFD brokers is that you can trade with leverage. This means you can use a small amount of money to control a large position. For example, if the leverage is 10:1, you can trade $10,000 worth of Amazon stock with only $1,000 in your account.
Leverage allows you to magnify your profits, but also your losses. So you need to be careful and use risk management techniques, such as stop-loss orders and position sizing.
Also, you can make money even when Amazon stock isn't doing too well like right now. You can buy (go long) if you think the price will go up, or sell (go short) if you think the price will go down.
The drawback is you don't receive dividends, splits, or voting rights. You also have to pay overnight fees if you keep your positions open for more than one day.
Savvy CFD traders trade stock CFD for short-term trading, speculating, and hedging.
Mitrade is one of the leading CFD brokers for Amazon stock trading. The ASIC-regulated broker offers traders a state-of-the-art platform that guarantees speedy execution and flexible trading.
How To Buy and Sell Amazon Stock CFD on Mitrade？
Buying and selling Amazon stock CFD on Mitrade is straightforward. Once you've created an account and funded it, you can navigate to the trading platform and choose Amazon from the list. You'll see the following window:
If you're certain that Amazon's bad run will continue, you can click sell. Vice versa, if you suspect a rebound or if you just want to buy and hold the stock for some time.
The next window you'll see is where you'll choose the size of your position and also choose profit targets and loss limits.
An important point to talk about here is that Mitrade offers up to 5x leverage for Amazon CFDs trading. This means that you can purchase a full Amazon share with just one-fifth of the total cost.
As a result, you'll only lose a fifth of the investment if you're wrong, but you can potentially make up to 5x of the investment if you're right on the stock's short to near-term direction. It's an advantage you can't get from a standard stockbroker or a fractional shares trading company.
Most importantly, you retain the right to close your position even before it reaches your profit targets or loss limits.
The steps for buying and selling Amazon stock CFD on Mitrade can be summarized as follows:
Step 1: Create a new Mitrade account or login to an existing account.
Step 2: Select "Amazon" in the stocks category or find it through the search bar.
Step 3: Click on the "Buy" or“Sell” button in the trade window that appears.
Step 4: Complete the order details by choosing the volume of shares, preferred leverage, stop-loss and take-profit targets.
Step 5: Confirm your trade.
Direct market access | Deal on rising and falling market | 24-hour trading | Limit and stop-loss for every trade
* The content presented above, whether from a third party or not, is considered as general advice only. This article should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments.