So Why Buy Amazon Stock This Month?
While shares will get issued to shareholders in a greater number – the overall company value and stakes held by prior investors will remain unchanged. Even though Amazon’s stock-splitting plans aren’t requiring you to buy its stock, there are a few excellent reasons to purchase Amazon stock this month.
Amazon Has a Robust Advertising Industry
The continued dominance of the eCommerce industry, trends, and consumer habits have played a vital role in Amazon’s inevitable transformation to become the advertising leader it is today. Consumers in the US alone prefer to shop at Amazon if they have the option to purchase products only from one store. 74% of consumers use Amazon as a starting point of their buyer’s journey, visiting the site to conduct their research.
Investors reacted favorably to the news that Amazon reported its ad sales segment as a separate metric when it reported its fourth-quarter results back in February. Amazon’s ad sales grew by 32% from 2020 to $9.7 billion. For context, YouTube’s ad revenue totaled $8.6 billion in the same quarter.
It was previously hard to estimate what Amazon’s ad revenues were before the most recent report, but now eMarketer has a better grasp on the size and growth of the business. As of 2018, Amazon’s advertising market share was less than 12%, and Amazon’s business will likely exceed 15% by 2023. An all-time high for people who decide to invest in the company.
What Are The Most Profitable Types of Ads?
Jungle Scout reports that advertisers spend the remainder of their total advertising budget on loose-match ads, substitutes, and ASIN advertising. Loose-match ads often have lower click-through rates than close-match products and other ad-targeting types, enabling advertisers to spend more on ads, even though they may not always get a good return on investment.
Amazon’s lucrative lead in the cloud
AWS, Amazon’s cloud computing business, is where the company makes most of its money, not its e-commerce business. While AWS represents only 13% of total revenue, it generated 74% of the company’s operating income. In addition to being immensely profitable, Amazon’s cloud business is also booming, with sales rising 40% year over year in the fourth quarter to a profit of $17.8 billion. These figures are impressive enough, but when you look at Amazon’s share of the cloud infrastructure market, which includes $191.7 billion, you can see Alphabet’s potential even more clearly.
Cloud computing is AWS’s fastest-growing, most profitable market, and the company is the dominant player in the market, all of which indicate the company’s long-term success.
Take Away
The upcoming stock split may be attracting investors now, but Amazon’s strengths in advertising and cloud computing are more compelling reasons to buy the stock. To learn more about finance and stay up-to-date with what companies to invest in.
