This is a step-by-step stock review to answer the question, is Amazon (AMZN) stock a good buy?
This article will teach you how to use the 4Ms of investing. This will be a detailed walkthrough to show you how the 4Ms work and why they are important. If you are interested, you can log into Tykr to use the 4M Confidence Booster (Powered by OpenAI) which will allow you to complete a 4M Analysis in less than 60 seconds.
What are the 4Ms?
- MOS (Margin of Safety) – The MOS is the math part of investing which includes the Summary, Score, and MOS (Margin of Safety).
- Meaning – The meaning is the business model and how scalable the revenue streams are.
- Moat – The moat is how the business compares to other companies in the same Sector and Industry.
- Management – The management is the track record of the CEO.
What 4M score are we going for?
- 80-100 = High confidence – Yay! You should have high confidence buying this stock. It passes all 4M!
- 60-79 = Moderate confidence – Alert! There may be better stocks in the market. Only buy this stock if you truly believe the company will improve!
- 0-59 = Low confidence – Warning! There are better stocks in the market. Due to the low score, you should consider looking at other stocks.
Table of Contents
1. Amazon Company History
When investing in stocks, it’s important to know the company’s history. This helps us understand the various revenue streams, if they acquired other companies, how they grew through difficult times, and how they separated themselves from the competition.
- Inception: Amazon started in 1994 as an online bookstore by Jeff Bezos in Seattle.
- Rapid Expansion: It quickly diversified into selling various products like electronics, clothing, and more.
- Innovative Strategies: Introduced features like 1-click shopping, Amazon Prime, and Kindle e-reader, revolutionizing e-commerce.
- Global Reach: Expanded internationally, establishing marketplaces in multiple countries.
- Tech Powerhouse: Amazon became a leader in cloud computing with Amazon Web Services (AWS), offering services to businesses and governments.
- Diverse Portfolio: Acquired companies like Zappos, Twitch, and Whole Foods, diversifying its offerings.
- Retail Dominance: Grew to be one of the world’s largest retailers, reshaping industries with its logistics and delivery networks.
- Customer-Centric Approach: Focused on customer satisfaction, prioritizing convenience, selection, and competitive pricing.
- Innovation Hub: Continues to invest in emerging technologies like AI, robotics, and autonomous delivery systems.
- Impact: Transformed consumer habits, disrupted traditional retail, and influenced the digital landscape globally.
- Visionary Leadership: Jeff Bezos’ vision and leadership shaped Amazon into a powerhouse, with a relentless focus on long-term growth and innovation.
2. MOS (Margin of Safety)
When investing in a company, the first step is to look at the financials. Fortunately, Tykr does this for us automatically. The higher the score, the stronger the financials and the safer the investment. The higher the MOS, the higher the potential returns you can make.
- Summary: Watch
- Score: 84/100
- MOS: 1%
To see the most up-to-date Summary, Score, and MOS, please log into Tykr.
3. Meaning
When investing in a company, it’s important to know how a company makes money. A mature business model has multiple streams of revenue which allow the company to weather downturns in the economy.
Here is how Amazon (AMZN) makes money:
- Selling products online: Amazon sells a wide range of products, from electronics to clothing, making money from each sale.
- Amazon Prime subscription: Customers pay for Amazon Prime membership, which offers benefits like free shipping, streaming services, and more.
- Amazon Web Services (AWS): Provides cloud computing services to businesses, earning revenue through subscriptions and usage fees.
- Advertising: Earns money from companies who pay to advertise their products on Amazon’s platform.
- Third-party seller services: Charges fees to individuals and businesses who use Amazon’s platform to sell their products.
- Subscription services: Offers additional subscription services like Kindle Unlimited and Amazon Music, generating recurring revenue.
- Digital content: Sells digital content such as e-books, music, and video downloads.
- Kindle e-readers and devices: Makes money from sales of Kindle e-readers and other Amazon devices.
- Physical stores: Revenue from Amazon physical stores like Amazon Go and Amazon Books.
- Amazon Logistics: Offers delivery and logistics services, generating revenue from shipping fees and delivery services.
Here are a few of the other companies that Amazon (AMZN) has acquired over the years. This is important because a company will use a “Buy before build” philosophy to go to market faster and add additional streams of revenue. A company with more revenue streams has a more stable business model. Keep in mind, that most companies don’t build new software because it takes too long to go to market and generate revenue.
- Whole Foods Market
- Twitch
- Zappos
- Ring
- PillPack
- Audible
- IMDb
- Goodreads
- Annapurna Labs
- Kiva Systems
4. Moat
When investing in a company, it’s important to understand how a company ranks against other companies in the same sector and industry. Based on the Score, here is how Amazon (AMZN) stacks up against other companies.
- Amazon (AMZN) – 84/100
- Alphabet (GOOGL) – 72/100
- Microsoft (MSFT) – 67/100
- Walmart (WMT) – 67/100
- Alibaba (BABA) – 61/100
- Rackspace (RXT) – 44/100
To see the most up-to-date Summary, Score, and MOS and each stock, please log into Tykr.
5. Management
When investing in a company, it’s important to understand who the CEO is, what they have accomplished in the past, and how they have helped this company grow. Good leaders typically have stronger cultures, less turnover, and better returns in the stock market.
- Expanded Amazon Web Services (AWS) into a dominant force in cloud computing, leading to significant revenue growth and market share.
- Spearheaded the development and launch of innovative AWS services, including Amazon EC2, Amazon S3, and Amazon RDS, revolutionizing the industry.
- Implemented a customer-centric approach, prioritizing customer satisfaction and feedback, leading to improved service offerings and customer loyalty.
- Fostered a culture of innovation and experimentation within Amazon, encouraging the development of new products and services.
- Played a key role in the acquisition of companies like Twitch and Ring, diversifying Amazon’s portfolio and expanding its reach into new markets.
- Oversaw the successful integration of acquired companies, leveraging their technologies and expertise to enhance Amazon’s offerings.
- Led initiatives to improve operational efficiency and sustainability across Amazon’s operations, reducing costs and environmental impact.
- Advocated for diversity and inclusion within Amazon, promoting initiatives to increase representation and opportunities for underrepresented groups.
- Established Amazon’s leadership position in artificial intelligence and machine learning, driving advancements in technology and product development.
- Positioned Amazon for continued growth and success through strategic investments, partnerships, and long-term planning.
7. 4M Score
All of our homework on this company leads up to the 4M Score. A lot of investors only look at the numbers. Yes, it’s important to look at the first M (MOS) which is the math part of investing but it’s also important to look past the numbers and also look at the Meaning, Moat, and Management. If all 4Ms pass, we should have high confidence in buying this stock.
What 4M score are we going for?
- 80-100 = High confidence – Yay! You should have high confidence buying this stock. It passes all 4M!
- 60-79 = Moderate confidence – Alert! There may be better stocks in the market. Only buy this stock if you truly believe the company will improve!
- 0-59 = Low confidence – Warning! There are better stocks in the market. Due to the low score, you should consider looking at other stocks.
👉 The 4M Score of Amazon (AMZN) is 64/100.
To see the most up-to-date 4M Score, please log into Tykr.
8. Is Amazon (AMZN) stock a good buy?
Some of the top questions investors can have is Amazon (AMZN) stock a good buy or should I buy Amazon (AMZN) stock?
Amazon is a tempting investment due to its market dominance, diverse revenue streams, and relentless innovation. With a strong global presence and a powerful brand, Amazon continues to expand and innovate, driving long-term growth. However, potential drawbacks include its high valuation, regulatory risks, competition, and sometimes lower profit margins due to its focus on long-term growth. Whether Amazon is a good investment depends on individual factors such as investment goals, risk tolerance, and assessment of its future prospects.
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To truly know if Amazon (AMZN) is a good stock to buy or sell, we recommend you log into Tykr. Within seconds you can see the Summary, Score, MOS, and 4M Score.
If you found this stock review interesting, you may also like this review on Apple.