Warren Buffett May Not Be Buying Amazon Stock, But You Should

Warren Buffett recently told CNBC he didn't have a good reason for not investing in Amazon stock. Here are a few good reasons why you should.

Warren Buffett May Not Be Buying Amazon Stock But You Should
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Shares of Amazon.com Inc (NASDAQ:AMZN) have racked up decent gains this year, and are up by over 13% in under three months. That's more than what the stock eventually returned in 2016 after big intermittent swings on both sides. However, if you're a long term investor, and are considering an investment in AMZN stock, that shouldn't stop you. In spite of the stellar growth it has registered in recent years, Amazon has a lot of room for growth, and the stock is likely to deliver healthy long term returns. Amazon's focus on growth may not go down too well with all types of investors though. For instance, if you're a value investor like the legendary Warren Buffett, Amazon stock may not appeal to you all that much. But if you're chasing influential companies that can deliver high growth rates, you should definitely take a look at Amazon (NASDAQ:AMZN).

You Haven't Missed The Bus Yet With AMZN stock.

It's easy to feel like you've missed the bus with stocks that have delivered the kind of returns that AMZN has. Amazon's growth story even got legendary investor Warren Buffett to admit that he missed out big time. A recent post on CNBC quotes Buffett saying, "Obviously, I should have bought it long ago", adding "It's one I missed big time". However, as Buffett himself points out, Amazon CEO Jeff Bezos is a "terrific business person", and that's not the only reason why it's not too late to invest in AMZN stock yet.

For starters, online retail still accounts for just a small fraction of total retail sales globally, even after having grown at a robust pace for several years now. According to eMarketer, global online retail sales are estimated to have accounted for just 8.7% of total retail sales in 2016, and the research firm expects that percentage to climb to 10% in 2017. That's still a very small fraction of the total. And as more transactions move online, the numbers are bound to swell. eMarketer expects the value of global online retail sales to double over 2016 numbers, to $4 trillion by 2020. What's more, online retail sales will still account for just 14.6% of total retail sales worldwide, after having doubled in 4 years.

Amazon is well placed to take advantage of this ongoing shift towards online shopping. And if reports are to be believed, the e-commerce giant is also in talks with Souq.com, to expand its footprint in the Middle East. As we'd highlighted when similar rumors emerged late last year, the Souq.com deal, if it materializes, is likely to help Amazon on multiple fronts. And deals of this kind will only make the narrative even more compelling for investors, assuming that they don't significantly alter the company's financial position.

Amazon.com To Have A Growing Influence On Online Consumption Patterns.

According to a report by BloomReach, "approximately 9 in 10 consumers will check Amazon even if they find a product they want on another retailer’s site." And frankly, that's not very surprising, considering that "Amazon has increased its lead as consumers’ first destination for product search over search engines and retailers." According to the report, about 55% of customers begin their product search on Amazon, up from 44% a year ago. It's not surprising that these numbers dwarf the 16% share held by all other online retailers put together. What's really impressive is that Amazon's share as the starting point is close to twice as much as the 28% share held by search engines like Alphabet Inc's (NASDAQ:GOOGL) Google. And BloomReach isn't the only source that highlights Amazon's growing influence on online consumption patterns. There's also a recent study by Raymond James Research, which was cited in a post on Business Insider, which also offers a detailed insight into Amazon's ability to attract the "prime 18 to 29 year age group", apart from confirming the trend highlighted by BloomReach.

A colleague also recently made important points about the growing popularity of Amazon's Alexa, and how that could further catalyze the shift in shopping-related search patterns, aiding Amazon.com in the bargain. Alexa, Amazon's personal assistant has gained popularity following the launch of Amazon's Echo smart speaker. And predictions are that online search will gradually transition to voice-based searches. If that does happen, you could expect an even larger chunk of folks to start their product searches on Amazon. If you're interested, Business Insider's Matt Weinberger has done a great job explaining the why and how of this. In short, it should suffice to say that 32% of Echo owners have used the device to "buy something on Amazon Prime". That's "at least once" and potentially more than once.

To sum up, the narrative, clearly, only seems to be getting even more compelling for Amazon.com (NASDAQ:AMZN). You might have missed the great ride that Amazon shareholders have enjoyed in the years gone by. However, it's quite evident that this growth story is far from over. AMZN stock still looks like a good long-term investment option for investors with a reasonable risk appetite.

Looking for great tech stocks? Check out Amigobulls' top stock picks, which have beaten the NASDAQ by over 132%. If you're looking for stocks from the auto sector, you can also take a look at out top auto picks, which have outperformed the S&P 500 by over 159%.


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Vikram Nagarkar Vikram Nagarkar   on Amigobulls :

Neither Amigobulls, nor any members of its staff hold positions in any of the stocks discussed in this post. The author may not be a certified/registered investment advisor, and the opinions expressed should not be treated as investment advice. Buying and selling of securities carries the risk of monetary losses. Readers/Viewers are advised to carry out their own due diligence and consult their investment advisors before making any investment decisions. Neither Amigobulls, nor the author have any business relationship with any of the companies covered in this post.

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Comments on this article and AMZN stock

gr1800
bullish
Amazon is a buy. RH
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