Updated May 19, 2023

How to Invest in Amazon

By Anna G
Read more about Investing
Ad Disclosure: This article contains references to products from our partners. We may receive compensation if you apply or shop through links in our content. This compensation may impact how and where products appear on this site. You help support CreditDonkey by using our links. (read more)

Amazon has been one of the most impressive high growth stocks. Is it right for your portfolio? Learn how to invest in Amazon, even with as little as $1.

What are the steps in buying Amazon Stock?
  1. Create your account
  2. Fund your account
  3. Search for Amazon (AMZN)
  4. Decide how much to buy
  5. Place your order

Amazon is one of the highest-priced stocks available on U.S. exchanges.

Founded in 1994, Amazon started as an online bookseller service. Now, it is a global powerhouse and a dominant player in various industries like e-commerce, cloud computing, digital streaming, and more.

If you're interested in buying Amazon stock, here's a step-by-step guide to help you start. We'll also talk about some factors to consider before investing in a company.

Disclaimer: CreditDonkey does not advise you to invest in any particular company. This article merely guides how you can invest in Amazon.

Is Amazon on the stock market?

Yes, Amazon had its Initial Public Offering (IPO) on May 15, 1997, priced at $18.[1] The stock is traded on NASDAQ under the ticker symbol AMZN.

How to Buy Amazon Stock

You can buy Amazon stock using any brokerage or trading app. There are no special qualifications needed.

1. Create an Account with a Brokerage

Before you can start investing in Amazon, you will need to create an account with a brokerage firm or trading app. You can visit the brokerage's website or app and follow the instructions there to set up your account.

Typically, you'll need to provide:

  • Your name
  • Social Security number
  • Address, phone number, and email
  • Date of birth

You may also need to provide a copy of your driver's license or passport to verify your identification.

Don't have a ton of money to invest? Look for a brokerage that supports fractional shares. This means you can purchase just a tiny piece if you don't have enough money for a full share. This lets you to still invest in Amazon even if you only have $10.

There are several different account types you can open (note that not all brokerages support every account type:
  • Taxable: A general-purpose investment account
  • Joint: An account shared between two individuals
  • Retirement (includes Traditional and Roth IRA)
  • 529 College Savings
  • Custodial: An account set up for a minor

Keep reading for our top recommended brokers to buy Amazon stock.

2. Fund Your Account

Once your account is created, you will need to fund it to start trading. Just link it to your bank account so you can transfer money. Depending on the brokerage, you may need to deposit a minimum amount to start trading.

Be sure to read through the terms and conditions of the platform carefully before making any investments.

Now, you can start investing in Amazon stock.

Once you've funded your account and are ready to buy, search for Amazon stock using their ticker symbol 'AMZN'.

The company should appear, along with Amazon's other relevant data, such as current stock price and daily average volume.

Click on the company listing for more detailed information, including news updates and analyst ratings. It's smart to research the company and consider any risks before investing.

4.Decide How Much You Want to Buy

The next step is deciding how much Amazon stock you want to buy. Most platforms will let you enter how many shares or the exact dollar amount you want to buy.

For example, if the investing app allows for fractional shares, you can say that you want to buy $50 worth of AMZN (instead of full shares).

After entering the details, you are now ready to place your order.

5. Place your order

Once you have entered all the information, review it one last time and click 'place order' to complete your purchase of Amazon stock. Your order will be processed in a few minutes, and you will receive a confirmation when it has gone through.

After that, you can view your holdings in your account portfolio and track their performance over time.

There are two types of orders you can execute to place your trade:
  • Market order: Execute the transaction now at the current market price.
  • Limit order: Set a specific price at which you wish to buy. This gives investors more control. But if the stock never hits your price, the trade will never be executed.

Best Brokerages to Invest in Amazon

Pros and Cons of Buying Amazon Stock

Pros:

  • Constant yearly increase in revenue
  • Leader in e-commerce, streaming, and cloud computing
  • Constantly expanding services to consumers

Cons:

  • Very expensive share price
  • High prices mean volatile shares
  • Facing increased regulatory scrutiny as it grows

Why Invest in Amazon?

Amazon has a proven track record of consistent and impressive revenue growth, with a recent 9.87% YoY increase. It's the top US brand and leading streaming platform, always innovating and expanding to attract customers and boost sales.

Furthermore, Amazon's focus on customer-centricity and its commitment to delivering a seamless and convenient shopping experience has helped build strong customer loyalty.

About 26 million customers ordered products with Same-Day Delivery in the first quarter of 2023, marking a 50% increase from the previous year.

Amazon Web Services (AWS) Expansion
Amazon's success is largely due to its internet cloud infrastructure, AWS. It is its fastest-growing revenue source, with a recent 16% increase in its sales growth.

AWS continues to expand to reach more customers worldwide, with new regions opening in Malaysia and Australia. Also, S&P Global and Snowflake are partnering with AWS to offer secure cloud services and improve product integration. AWS's advanced cloud technology is proving to be beneficial for both companies.

Partnerships with S&P Global and Snowflake can boost AWS's customer base and enhance its position as a top cloud provider. These collaborations also inspire investor confidence, potentially leading to higher stock performance.

Here are the highlights of Amazon's First Quarter 2023 Report:[2]
  • Net Sale increased by 9% to $127.4 billion, or 11%, with foreign exchange rate adjustments
  • Operating income increased to $4.8 billion from $3.7 billion last year
  • Net income increased to $3.2 billion from a net loss of $3.8 billion in Q1 2022
  • Earnings per share were $0.31, compared to a loss of $0.38 per share in Q1 2022

Amazon's business strategy can be a bit tricky. So here's additional information that may help you understand the company before you invest.

What is Amazon's valuation?

Amazon is valued at $1185.07 billion this Q1 2023, with a price-to-earnings ratio 140.85. This shows that Amazon is overvalued, and its stocks tend to be more volatile. But for Amazon, it also helps to check its sales growth. Here's why.

When evaluating Amazon's value, traditional methods like Market Capitalization and Price-to-Earnings Ratio are not enough for accurate analysis. Including sales growth in your analysis will give you a clearer picture of its overall corporate health.

When looking at how much money Amazon makes compared to its stock price, it often seems very expensive. This is because Amazon puts most of its profits back into growing the business instead of keeping them as profit. This helps Amazon grow faster and pay less in taxes.

To better understand, here are common ways investors measure a company's value, especially for Amazon.

  1. Market Capitalization (Market Value)
    Market capitalization (Market value) is how we measure the size of a public company. We do this by multiplying the current stock price by the number of shares outstanding.
  2. Price to Earnings Ratio (P/E Ratio)
    The P/E ratio shows if a company is undervalued or losing money. Low but positive means high earnings, while high negative means heavy losses.
  3. Sales Growth Rate
    Sales growth shows the change in revenue over a fixed period of time. Such as measuring the overall performance over two fiscal periods to determine whether there has been an increase or decrease in earnings.

How to read Price to Earnings Ratio (PE Ratio)?
  • Companies with a P/E ratio above 30 or in the negative range are often labeled "growth stocks." This suggests that investors predict future growth or profitability.
  • While positive P/E ratio below 10 are generally regarded as "value stocks," indicating that the company is already profitable and unlikely to see significant growth in the future.

Next, let's see how all this information fits your investment portfolio.

Don't make the buy-or-not decision based on the stock's price alone. Instead, consider if Amazon is right for your goals and risk tolerance. This comes down to what kind of investor you are.

Are you looking for passive income through dividends? Despite being a blue chip stock, Amazon does not pay dividends. Is this something you want?

How much risk can you afford? Remember that stocks can be volatile, some sectors more so than others.

Amazon has done extremely well in the past years, but there are arguments that the FAANG bubble could burst (Facebook, Apple, Amazon, Netflix, and Google). It's best if you can commit to holding your investment for the long term to ride out any downturns.

If you have second thoughts about investing in Amazon, you may want to explore other options in the industry, like Walmart or Netflix.

Alternatives to Amazon Stock

Walmart and Netflix are some notable companies, along with Amazon, that lead the e-commerce and video streaming industry. These are also good alternative options to invest in.

  1. Walmart (NYSE:WMT)
    Walmart is Amazon's competitor in the e-commerce or retail industry. It is a big retail chain with over 10,000 stores in 20 countries and eCommerce websites.[3] Walmart also owns Sam's Club, a big warehouse store. They focus on selling a mix of groceries and other stuff at really low prices. It is currently valued at $403.33 billion.

    Walmart's Q1 2023 Earnings Report: [4]
    • Market cap:$403.33 billion
    • Revenue: $141.6 billion, a 2.4% increase
    • Net sales: $23.8 billion, a decrease of $3.5 billion

  2. Netflix (NASDAQ: NFLX)
    Netflix is the second leading streaming platform, with Amazon Prime Video ranking 1st in the market. Netflix has gained immense popularity, with a vast customer base of over 200 million paid subscribers in more than 190 countries.[5] This global reach showcases the platform's ability to attract viewers worldwide.

    Furthermore, Netflix's stock has been a top performer in the S&P 500 index over the past ten years, consistently delivering impressive returns despite competition from other streaming services. As a result, many investors consider it an attractive investment opportunity.

    You can learn more on how to invest with Netflix with our guide.

Bottom Line

Before investing in any stock, it's smart to research the company to see if it's a good fit for your portfolio. After that, it's just a matter of finding the right brokerage for your needs.

Remember to review your investments to see how they're performing regularly and if you need to make any adjustments to your portfolio.

References

  1. ^ Amazon. Amazon.com, Inc. Announces Initial Public Offering of 3,000,000 Shares of Common Stock, Retrieved 5/21/2023
  2. ^ Amazon. Q1 2023 Update, Retrieved 05/19/2023
  3. ^ Walmart. Quick Facts, Retrieved on, 05/19/2023
  4. ^ Walmart. Walmart's Earning Reports, Retrieved 05/19/2023
  5. ^ Netflix Investor. Company Profile, Retrieved 5/21/2023

Write to Anna G at feedback@creditdonkey.com. Follow us on Twitter and Facebook for our latest posts.

Note: This website is made possible through financial relationships with some of the products and services mentioned on this site. We may receive compensation if you shop through links in our content. You do not have to use our links, but you help support CreditDonkey if you do.

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