Amazon (AMZN) has long been a topic of debate for many in the investing and trading community. The company’s spending with low margins on sales put the stock in a bit of a bind in the beginning. However, the company eventually reached profitability, gaining massively in the market as a result. Today, there are strong arguments on both sides of the fence, leading to volatility and opportunities nearly every day. Today, we’ll talk about the argument from both sides of the coin, how it equates to opportunities for binary options traders, and what traders should be watching.
The Bearish Argument On Amazon
While it’s only been recently that the bears have started to show their heads on Amazon, we’re starting to see more and more bearish posts in the investing threads. Ultimately, there are a couple of things that lead to this bearish opinion.
- Spending – Amazon built its business around spending on infrastructure. In fact, it was this spending that led to losses and declining stock values in the beginning. While the company is now a profitable one, the spending has increased greatly, and some investors are concerned that the spending will lead to the demise of the company.
- Market Share – In terms of market share, there is another concern among some investors. Pointing to the fact that in the global e-commerce space, Amazon only holds about 5% of the market share, some investors argue that the company hasn’t done enough to grow and should be much further along at this point.
The bears argue that the stock is highly over-valued given its spending, relatively small profits, and inability or lack of willingness to capture the global market.
The Bullish Argument On Amazon
While the bears definitely have a valid argument, personally, I have to side with the bulls. Here’s why…
- Market Share – First and foremost, the bears look at the 5% global e-commerce market share as a bad thing. However, I, like many bulls, believe this is a great thing. The truth is that Amazon hasn’t reached out to the global community quite yet on the e-commerce side of things. However, they’re starting to spend massive amounts of money on global expansion. The company is seeing incredible success in India as a result. Now, leaked documents show that the company is planning to expand into Indonesia, Malaysia, and the Philippines. Now that Amazon is working on expansion in these areas, we can expect big spending followed by great success.
- AWS – Another very important factor here is the company’s cloud computing service unit known as Amazon Web Services. This unit is a massive profit driver for the company, and it is taking the industry by storm. In fact, the company is already 10 times larger than its 14 closest competitors combined. That includes names like IBM and Microsoft.
- Innovation – Amazon spends a massive amount of money on R&D. In fact, 8 to 12 percent of its sales earnings are spent on further innovation. This money continues to lead to incredible advantages for the company and will likely continue to do so.
Why The Debate Is Great For Binary Options Traders
At the end of the day, binary options traders make the most money when assets are on the move. With the strong opinions on both sides of the fence, Amazon is a true battle between the bears and the bulls, constantly leading to movement in the market that generates opportunities for binary options traders.
What Traders Should Be Watching For Ahead
Moving forward, binary options traders should be keeping a close eye on Amazon. In order to take advantage of the movement, pay close attention to how analysts portray the company in their reports. Also, Amazon will be releasing an earnings report soon that will both outline the money they are spending and not only the money they’re making, but potential opportunities ahead as well.
What Do You Think?
Where do you think Amazon is headed moving forward? Join the discussion in the comments below!
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