Amazon Stocks: Buy, Sell or Hold?

Investing doesn’t have to be complicated. Sometimes it’s just a matter of ticking a few important boxes. Amazon (AMZN -3.65%) has checked those boxes for years, and for one, it’s one of the best performing stocks Wall Street has ever seen.

But what are those boxes, and does Amazon still have what it takes to make money for investors? Let’s examine whether Amazon is a buy, sell or hold today.

Are Amazon’s competitive moats still intact?

Amazon began as an online bookstore in the late 1990s and has become a one-stop shop for consumers across America. Today, you can buy almost anything from Amazon; About 200 million households pay for Amazon Prime membership to unlock all of the company’s products, services and benefits. Amazon didn’t stop there; started selling its information technology services to customers through Amazon Web Services (AWS) in 2006, and today is the world’s leading cloud platform.

Amazon makes more than $600 billion in annual revenue across its businesses. It dominates US e-commerce with about 38% of the US market. AWS controls 31% of the global cloud market. Being the biggest comes with competitive advantages. For example, its extraordinary supply chain and logistics network can deliver more products faster than other e-commerce stores. It can also use its size as leverage with sellers to get the lowest prices. It’s a similar story in AWS, where companies get more value from Amazon than others, except maybe MicrosoftAzure, the next largest cloud platform with 25% market share.

Right now, Amazon’s biggest threat may be U.S. regulators, who may want to break Amazon’s dominance, rather than other companies dethroning it in e-commerce and the cloud.

Can Amazon still grow?

All companies mature and slow down eventually, and Amazon is no different. However, the fact that Amazon can still grow revenue at a double-digit rate at its size is remarkable:

AMZN Revenue (TTM) data by YCharts

Amazon’s growth-oriented culture means the company could continue to grow bigger. For starters, e-commerce still only accounts for 16% of total retail spending in the United States. Amazon should benefit if it continues to expand. Meanwhile, the world’s transition from on-premise to cloud computing is underway. Experts believe that the global market for cloud services could grow by 21% annually until 2030, so there is still plenty of opportunity there as well.

These are just the two core businesses of Amazon. The company has invested in media to grow its advertising business, including securing rights to live sports in the NFL and NBA. The company is also entering the healthcare field. Amazon has the deep pockets to keep pushing into new categories and is willing to make those efforts.

Is the stock price fair?

So far, so good, right? Amazon is a hotshot with the means to grow for years to come, but no stock is worth paying any price for. The good news is that high-quality stocks like Amazon only need a correct price to create fantastic long-term profits. However, Amazon offers something even better: it’s a relative bargain.

The stock trades at a forward P/E of 38, while analysts believe Amazon will grow earnings by an average of 23% annually over the long term. Its PEG ratio of 1.6 indicates a reasonably priced stock for expected earnings growth. I usually look for PEG ratios around 1.5 or lower if possible.

So what makes the stock a bargain? Amazon is known for aggressively reinvesting profits into businesses to grow the company, so earnings don’t always tell the whole story. Instead, investors can value the stock against the daily cash flow that Amazon’s business generates. Using that, the stock is near its lowest ratio in ten years!

AMZN price to CFO per share (TTM) data by YCharts

Amazon stock is reasonably priced or a complete bargain, depending on how you want to value it.

Buy, sell or keep Amazon?

Great investing happens when you can check all the boxes.

Amazon does that today. The company is as dominant as ever in e-commerce and continues to be a leader in the cloud. These existing businesses may grow in the coming years. Meanwhile, Amazon is leaning toward new opportunities. Finally, the stock is trading at a price that should allow Amazon’s wonderful business traits to translate into equally stellar investment returns over time.

This makes the stock an unusual buy for any long-term investor.