Amazon (NASDAQ: AMZN) shares have been falling over the past few weeks. After the stock hit an all-time high of around $3,700 at the beginning of July, it dropped to approximately $3,200 in the middle of August.
Following this performance, shares in the company have returned just 1.2% over the last 12 months. I think this presents an exciting opportunity.
While the stock has barely budged since September 2020, revenues have increased 27% year-on-year. And I expect to see further growth from the company when it reports its third-quarter results later in 2021. As such, I’d buy Amazon shares in September to take advantage of the equity’s depressed valuation.
Amazon has been one of the biggest winners of the pandemic. As brick and mortar stores worldwide were forced to close to try and stem the spread of coronavirus, customers increasingly turned to the online retailer to meet their needs.
Amazon rose to the challenge. It has been investing billions in developing its infrastructure and fulfilment network. This paid off last year.
For the company’s 2020 financial year, revenues increased 37% overall, and net income jumped 84%. The firm’s growth’s continued, although sales and earnings aren’t expanding as fast as they were. For the second quarter, revenues increased 27% year-on-year, and net income jumped 48%.
It seems to me that investors have been selling a stock because growth has slowed. That’s quite understandable. I don’t want to be paying a high price for a company that has its growth days behind it.
However, I think there’s a strong chance the market will re-evaluate its view of the enterprise towards the end of 2021. As the year matures, I’ll be able to build a stronger idea of how the group has performed this year.
While I’m not expecting a repeat of last year’s performance, I think Amazon’s numbers for the year will show this organisation’s still growing, and it’s growing faster than many of its peers.
These are the reasons why I’d buy Amazon shares for my portfolio in September, as the company gears up for the third and fourth quarter reporting periods.
Risks of owning Amazon shares
There are plenty of risks to this strategy. The company’s growth could fail to live up to expectations. In this situation, investors may continue to sell stock.
Amazon’s been a leader in the e-commerce space in the past, but the group’s now facing fierce competition. The pandemic has forced many retailers to invest in their online divisions, increasing the pressure on the US retail giant.
This additional competition could hold back the company’s growth. Amazon may also face risks, from additional regulation and higher tax rates, weighing on group profits.
Despite these risks and challenges, I think the outlook for the retailer’s bright. That is why I’d buy Amazon shares in September ahead of what I believe will be a bumper set of full-year results.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Amazon. The Motley Fool UK has recommended the following options: long January 2022 $1,920 calls on Amazon and short January 2022 $1,940 calls on Amazon. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
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