With a possible stock-market downturn and recession on the horizon, Amazon.com Inc. stock looks less appealing now than it would amid robust economic growth.
However, InvestorPlace Media recently offered three reasons why the stock of the online retailing giant (AMZN) just might be a savvy investor’s best bet to survive a recession.
“On a fundamental basis, Amazon offers some surprisingly recession-resistant catalysts that make buying on any dips a viable proposition,” the report said.
Here is a quick glance at the reasons:
1] E-commerce Is Ideal for Cost-Conscious Consumers
“Although we'll collectively trim down our spending in a recession, we won't quit the habit. Amazon has taken an increasingly larger share of the broader retail pie. So, recession or not, people will shop on the e-commerce giant's website. And that augurs well for AMZN stock,” the report said. “You also must consider the inherently cost-effective nature of online shopping. Obviously, you don't have to drive to a physical location: you can simply pick and choose what you want from the comfort of your own home. Neither do you have to fight for parking or stand in line. Over time, these little frustrations add up to serious dollars, dollars which recession-hurting consumers don't have.”
2] Amazon to Benefit From Premium on Cheap Entertainment
“During an economic slump, sources of cheap entertainment will experience a surge in demand. For instance, during the Great Depression, the so-called golden age of Hollywood came alive. The box office provided a moment of respite to American workers who were otherwise battling an unprecedented crisis,” the report said. “But one thing is certain: people will look for cheap distractions. AMZN has the right ticket. Once you're done extending your plastic on Amazon.com, you can take advantage of their streaming services. A few years back, the company spun off Prime Video in a bid to disrupt Netflix (NFLX ). And in a recession, Amazon has an advantage of consolidating various consumer-level components under one umbrella.”
3] Amazon Web Services to Support Amazon Stock
“The beauty of Amazon stock is that it's no longer just a consumer-related investment. Over the years, the company has disrupted many technology sectors. The biggest impact so far is with cloud services. At the latest count, AMZN owns nearly half the public cloud's infrastructure. Incredibly, they're leading names like Alphabet (GOOGL ) and Microsoft (MSFT ), companies that really should take the lead here,” the report said.
“Naturally, this gives Amazon considerable leverage and buffer should a recession strike. Moreover, the cloud dominance virtually guarantees the company continued relevancy, even in a slump. That's because when used appropriately, the cloud can save large enterprises money on operating costs.”
As for the certainty of a recession, opinions obviously differ.
Nobel Prize winner Robert Shiller said that the odds of a recession in 2020 are less than 50%.
“In September 2008, we had the Lehman bankruptcy and the WaMu takeover and talk then shifted to, is this 1929 again?” Shiller said in an interview with Bloomberg News at London’s Ned Hotel. “It brought back fearful stories, but right now those stories aren’t so prominent.”
However, President Donald Trump's job approval rating has dropped from a career-high of 44% to 38%, with 56% disapproving, while six in 10 Americans believe there will be a recession within the next year and an equal number are concerned that prices will rise because of the trade war with China, an ABC News/Washington Post poll released Tuesday shows.
To be sure, Amazon stock has a very famous fan.
Warren Buffett’s Berkshire Hathaway Inc (BRKa) last month said it boosted its stake in Amazon.com by 11% during the second quarter, increasing its bet on the powerful online retailer even as stocks traded near record highs.
Berkshire said it ended June with 537,300 Amazon shares worth about $1.02 billion, up from 483,300 shares three months earlier, Reuters reported.
Meanwhile, Amazon.com Chief Executive Officer Jeff Bezos recently offloaded $2.8 billion worth of shares in the company, Reuters reported.
The move comes as part of a previously announced 10b5-1 trading plan. Bezos had previously said he plans to sell stock worth about $1 billion each year to fund his rocket company, Blue Origin.
Bezos’ former wife, Mackenzie Bezos, who currently owns Amazon stake worth more than $37 billion, is now the online retailer’s second largest individual shareholder.