The Amazon.Com, Inc (NASDAQ: AMZN) stock price was hit 3.5% lower on Monday as global markets became nervous of news of further trade tensions between the US and China.
Netflix Inc (NASDAQ: NFLX) and Microsoft Corp (NASDAQ: MSFT) have also been whacked.
About Amazon.Com (AMZN)
Amazon.Com is one of the world’s largest businesses, having started from humble beginnings in the late ’90s by Founder Jeff Bezos selling books online. In 1997, Amazon served 1.5 million customers.
Today, Amazon serves hundreds of millions of customers through its global e-commerce stores, millions via its AWS cloud server business and touches many more with its technology (e.g. Prime Video, Echo, Kindle).
In its 2018 financial year, Amazon generated net sales of $243 billion and reported a net profit of $10 billion, up 31% and 200%, respectively.
Why Amazon Shares Are Getting Hit
On Monday, the Dow Jones (INDEX: .DJI) and S&P 500 (INDEXSP: .INX) indices were crunched as news of yet more trade tensions between the USA and China made headlines.
According to MarketWatch, talks between the two economic superpowers broke down between May 9th and May 13th, with the US ultimately raising its tariffs on $200 billion of Chinese imports from 10% to 25%. China then retaliated with increased tariffs on $60 billion of US goods.
Who Cares?
For Amazon stock, the selloff is probably a mixture of a few things.
Firstly, Amazon shares have been on a tear in 2019 – rising from a low of $1,500 in January to over $1,800 today. In the share market, things rarely move in straight lines.
Second, around one-third of Amazon’s sales are derived from International retail sales and subscriptions. However, it’s debatable how much would be affected by Chinese tarrifs.
Third, trying to explain short-term share price movements is really anyone’s guess. Some news outlets suggest Amazon could be the target of new ‘predatory pricing’ laws. Other outlets are pointing to new delivery systems.
If you ask me, it’s just ‘volatility’ or the randomness of share prices.
Is Amazon Stock A Buy?
Amazon stock has always been more volatile than the broader market given its financials, rapid growth and willingness to take on new and uncertain ventures.
In my opinion, today’s volatility shouldn’t impact long-term investors’ decision to sell the shares. If anything, lower prices equal better prices.
Amazon is still fantastically run business with well-aligned management at the helm, it owns businesses with the widest of competitive moats, and it’s growing quickly.
If you’re looking for two other — but smaller — rapidly-growing technology shares, grab a copy of our free investing report below.
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Disclosure: At the time of writing, Owen does not have a financial interest in any of the companies mentioned.
