Amazon Stock Is Only Going to Climb

Amazon (NASDAQ: AMZN) is incredibly diversified and has a hand in many different areas. In this clip from “3 Minute Stocks Updates” on Motley Fool Live, recorded on March 30, Motley Fool contributors Rachel Warren and Brian Withers discuss Amazon’s continually impressive growth and talk about some of its recent initiatives.

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Rachel Warren: A couple of things I want to talk about that happened recently. We know the company reported its full-year 2021 earnings last month. Net sales grew at a steady pace of 22%. Year-over-year operating income was up to $24.9 billion compared with $22.9 billion in 2020. Net income was $33.4 billion. That was up considerably from net income of $21.3 billion in 2020. As we’ve been seeing in recent years, Amazon Web Services (AWS) continues to be a really strong avenue of growth for the company. Amazon said that that particular segment saw 40% year-over-year growth and that has a $71 billion revenue run rate. So, just extraordinary. Another thing that we also are seeing is that Amazon is continuing to invest heavily in Prime. Management has reported that since 2018 in the U.S., availability of free same-day delivery has expanded from 48 metropolitan areas to more than 90. Items available for Prime free shipping have increased over 50%. Members saved billions of dollars shopping on Prime Day. Another thing that we saw recently as well that may contribute to Amazon’s top and bottom line, but could also be attributed to the rising cost of supply chain issues as well as wage increases. Amazon famously has increased the price of a Prime membership in the U.S., with the monthly fees going from $12.99 a month to $14.99 a month. If you have an annual membership, you’re going to see that go from $119 a year to $139 annually. I will note this is the first time that Amazon has raised the price of Prime since 2018. Another partnership I saw Amazon entered recently was with a company called Stellantis (NYSE: STLA). Stellantis is an automotive manufacturing corporation that was actually just founded last year after a 50-50 cross-border merger between Fiat Chrysler Automobiles (NYSE: FCAU) and the French PSA Group (OTC: PUGOY) and, basically, Amazon and Stellantis have entered into a series of global multi-year agreements. They’re going to be working on a lot of different projects together. This is going to involve Amazon Devices, Amazon Web Services, Amazon Last-mile, and the companies are going to collaborate to use this technology from Amazon and its software in areas like vehicle development, connected in vehicle experiences, as well as training automotive software engineers. So, really an exciting one to watch. I’m also personally quite excited at the recent acquisition of MGM (NYSE: MGM), that Amazon finally closed. There’s a lot of good things happening for Amazon. They are expecting net sales growth between 3% to 8% for the first quarter of 2022. Good things continuing to happen for Amazon.

Brian Withers: It’s amazing how many fingers Amazon has in a bunch of different businesses. About six months ago, the company launched a series of robots for the home, including Astro. Yes. It looks like a dog, and a flying security drone that flies around your house and can be remotely controlled. Should investors be watching whether this initiative into robots pays off?

Warren: Like anything that Amazon gets into, as you said, it has its fingers in so many pots. It’s an area to watch. I’m not sure if this particularly will be a huge revenue driver for the company over the next few years. For example, the Amazon Astro home monitoring robot, I feel like most people aren’t going to drop a thousand dollars on that. You do get a six-month free trial of room protect proto, so that is a plus. This could be something now I think that pays off more like 5 to 10 years down the line. It’s one very small aspect of their incredibly diversified business and I think it could pay off for them in the future. So I’m not unhappy to see them in the space.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Brian Withers has no position in any of the stocks mentioned. Rachel Warren owns Amazon. The Motley Fool owns and recommends Amazon. The Motley Fool has a disclosure policy.

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