Amazon's Investment Strategies: Where Is The Money Going?

Amazon is a huge company with a diverse range of business segments, from its core e-commerce operations to cloud services and digital advertising. The company has grown rapidly and continues to expand, so it's no surprise that many people are interested in investing. Amazon's stock price has increased significantly over the years and the company has completed several stock splits to decrease the share price and make investing more accessible.

If you want to know how to invest in Amazon, there are a few ways to go about it. You can buy shares directly, invest in fractional shares, or purchase an ETF. You can also invest indirectly through an index fund or a mutual fund, or use a robo-advisor. Before investing, it's important to do your research and understand the company's financials, as well as the risks involved.

Amazon's revenue streams

Retail sales in North America are Amazon's biggest sales driver, with online sales accounting for a significant portion of the company's revenue. Amazon's e-commerce operations have expanded to include almost every type of consumer product, as well as media services. Amazon's North America segment brought in $86.3 billion in Q1 2024, a 12% increase year-over-year, and made up about 60% of the company's total net sales.

The International segment, which includes Amazon's retail business outside of North America, generated $31.9 billion in sales in Q1 2024, a 9.7% increase year-over-year, and accounted for 22% of the company's net sales.

Amazon Web Services (AWS), Amazon's cloud services business, is the company's fastest-growing segment and currently generates the majority of its operating income. AWS provides cloud services to businesses, government agencies, and academic institutions. In Q1 2024, AWS generated $25 billion in net sales, a 17.2% increase, and accounted for 18% of total net sales.

Amazon also generates revenue through subscriptions, advertising, and third-party seller services. Amazon Prime, for example, is a subscription service that offers benefits such as free shipping and access to exclusive content. Amazon's advertising services have also grown significantly, with businesses recognising the effectiveness of retail media networks as an advertising channel.

Amazon's revenue mix includes:

• Third-party selling services
• Subscription services
• Online sales
• AWS cloud services
• Advertising services
• Retail media networks

Amazon's business segments

Amazon's business model is highly diversified, and the company divides its business into three segments: North America, International, and AWS (Amazon Web Services).

The North America and International segments refer to geographical breakdowns of Amazon's retail business. They generate revenue from retail sales, subscriptions, advertising, and export sales. In Q1 of 2021, the North America segment contributed $64.37 billion in revenue (59.3% of the total revenue), while the International segment brought in $30.65 billion (28.2% of the total revenue).

The AWS segment consists of Amazon's cloud services business, which provides cloud services to businesses, government agencies, and academic institutions. In Q1 of 2021, AWS contributed $13.50 billion in revenue (12.4% of the total revenue).

Amazon's revenue streams include online stores, third-party seller services, AWS, advertising, subscription services, physical stores, and other sources. In 2023, Amazon generated over half a trillion dollars in revenue, with online stores contributing over 40% of total revenues.

Amazon's online stores include its various international domains, such as amazon.com, amazon.de, amazon.co.uk, and numerous acquisitions the company has made over the years. Amazon's eCommerce net sales account for the largest share of its revenue, reaching 44% by 2023.

Amazon also has physical stores, such as Amazon Go, Go Grocery, Amazon Fresh, and its subsidiary Whole Foods Market. However, the company's primary business is online, with a focus on its online marketplace where third-party retailers sell their products and Amazon earns a commission. In 2023, Amazon generated $140 billion from these commissions.

Subscription services and AWS make up the remaining quarter of Amazon's revenues. Amazon Prime is a significant revenue generator, with subscription revenue of over $40 billion in 2023. AWS is the most profitable segment, generating almost $23 billion in operating profit in 2022.

Amazon's competitors

Alibaba Group, with its platforms like Taobao, Tmall, and AliExpress, is Amazon's biggest competitor, particularly in the Chinese market. In 2023, Amazon's revenue was US$365 billion, while Alibaba's revenue was approximately $130 billion. However, in the Chinese market, Alibaba-owned marketplaces are outpacing Amazon.

In the US, Amazon's closest competitor is Walmart, with US$133 billion in revenue in 2023. Other key players in the US e-commerce market include eBay, Best Buy, and Wayfair.

In the UK, Amazon's main competitors are eBay, Vinted, AliExpress, and Etsy. Amazon's GMV (global Gross Merchandise Volume) in the UK was US$61.5 billion in 2023, while eBay's was US$12.3 billion.

Amazon's stock price history

Amazon's stock price has seen a steady increase since its initial public offering (IPO) in 1997. The company's stock price has grown significantly over the years, with the latest closing stock price as of November 14, 2024, being 211.48. The all-time high for Amazon's stock closing price was 214.10 on November 13, 2024.

Amazon's 52-week high stock price is 215.90, which is 2.1% above the current share price, and its 52-week low stock price is 141.50, which is 33.1% below the current share price. The average Amazon stock price for the last 52 weeks is 176.53.

Amazon's stock price is influenced by its financial performance and market trends. The company's revenue and profit growth, driven by its e-commerce and cloud computing businesses, have contributed to the increase in its stock price over the years.

In 2022, Amazon completed a 20-for-1 stock split, which reduced the share price from approximately $2,300 per share to $115 per share. This move made Amazon's stock more accessible to beginner investors and increased the number of shares available for trading.

Overall, Amazon's stock price history has been characterised by steady growth, with the company's strong financial performance and market dominance driving its stock price to new highs in recent years.

Amazon's stock purchase options

Buying Shares Directly

You can buy Amazon stock through an investment or brokerage account. You'll need to add money to the account and then search for Amazon stock within the brokerage's platform by searching for its ticker symbol, "AMZN".

Fractional Shares

If buying a full share is too expensive, you can invest in fractional shares. Many brokerage platforms enable users to invest in fractional shares, allowing you to purchase less than one share of Amazon stock. This option is ideal if you have a small amount of money to invest.

Exchange-Traded Funds (ETFs)

ETFs are a passive way to invest in Amazon stock. ETFs trade like stocks but hold shares of many companies, making them an easy way to gain broad exposure to the entire stock market or a specific stock market sector. You can buy ETFs just like you'd purchase shares of Amazon stock, using the ETF's ticker instead of Amazon's.

Restricted Stock Units (RSUs)

Amazon employees may also be awarded Restricted Stock Units (RSUs) as part of their total compensation package. RSUs vest over time and can make up a large portion of an employee's total compensation.

Before investing in Amazon, it's important to do your research and consider factors such as diversification, future investment plans, and how much to invest.

Frequently asked questions