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Stock Strategist

Why Amazon Is a Prime Investment

We expect it to continue to dominate its served markets.


We think Amazon (AMZN) is a compelling investment opportunity as the market continues to underestimate the secular shift toward e-commerce, the long-term opportunity for public cloud, and the growing importance of advertising within Amazon’s online presence. The company’s wide economic moat is driven by powerful network effects, cost advantages, high customer switching costs, and intangible assets, which we do not see being threatened. Amazon has been an obvious beneficiary of the pandemic-related lockdowns, and we believe that e-commerce trends have been pulled forward a couple of years. As the only true demand aggregator in the United States, this has strengthened the company in the near term, in our opinion, and leaves it in a better competitive position for the next five years.

We think online grocery shopping is here to stay, with the pandemic offering a proof of concept for many consumers who might not have been inclined to try it. While investors might have questioned the build-out of a captive transportation network two years ago, it proved to be a critical decision for the company and consumers and was the only real alternative for third-party sellers during the pandemic. We believe e-commerce will continue to take share from traditional retailers and forecast that Amazon will expand its e-commerce market share from 42% today to beyond 50% in 2025.

Dan Romanoff does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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