Why Amazon Stock Can Outperform In 2021

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Amazon.com, Inc. (AMZN) has grown from a fledgling online bookseller to one of the largest and most valuable corporations in the world. The company is continuing to chart a path to retail-market domination and has benefited immensely from its recent investments in logistics and distribution to meet increased COVID-19-related shopping-from-home demand.

The pandemic has lit a fire under AMZN stock because of the company’s ability to meet an increasing demand for online shopping and remote working with the help of cloud-based services. Moreover, with a new COVID-19 strain necessitating renewed lockdowns in some major economies, AMZN’s sales should skyrocket in the coming months. The company is now investing heavily to grow its fulfillment capacity, which could further strengthen its long-term competitive advantage.

AMZN’s robust business strategy, expanding operations, and innovations have helped the stock gain 65.8% over the past year. This impressive performance, combined with several other factors, has helped AMZN earn a “Buy” rating in our proprietary rating system. Here is how our proprietary POWR Ratings system evaluates AMZN:

Trade Grade: A

AMZN has recently been trading higher than its 200-day moving average of $2,896.89, which indicates an uptrend. However, the stock has gained only 5.4% over the past six months, which does not indicate extreme bullishness.

The company’s financials look impressive, however. For the fiscal third quarter ended Sept. 30, 2020, AMZN’s revenue has increased 37% year-over-year to $96.14 billion. Operating income has increased 93.8% from the year-ago value to $6.19 billion, while its EPS rose 193% from the prior-year quarter to $12.63.

On Jan. 5, AMZN announced the purchase of 11 aircraft from Delta Air Lines (DAL) and WestJet Airlines to join the Amazon Air cargo network in 2021 and 2022. This should support the company’s growing customer base at a time when people continue to rely on remote shopping and fast delivery. AMZN announced plans to open its first fulfillment center in the state of Louisiana in December. This will create more than 500 new, full-time jobs. The expansion should boost the company’s cash balance substantially.

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