Amazon stock analysis: 5 reasons to buy and hold in 2011 (AMZN)

Since the start of 2011, shares in Amazon.com, Inc. (NASDAQ:AMZN) have fallen nearly 3 percent, but the company’s prospects still look strong thanks to a growing product pipeline. Here are five reasons to consider adding Amazon stock to your portfolio today:

1) Welcome to the Cloud Drive. Amazon has a history of forging into new tech niches long before they’re popular. The best example of this is Amazon Web Services (AWS): Amazon’s paid cloud computing service wherein other companies pay Amazon for server space and computing infrastructure. AWS has attracted some impressive clients since it launched in 2006 including Nasdaq (NASDAQ:NDAQ) and The New York Times Co. (NYSE:NYT). Now, Amazon’s looking to take its cloud services to the common man. This week the company launched Amazon Cloud Drive. With Cloud Drive, anyone who wants it can get 5 GB of online storage for free. They can then use that server space to store music, videos and files online and access them from Web-enabled devices anywhere. If users end up needing more than 5 GB of storage, they’ll have to open up their wallets to Amazon.

2) It’s “Appstore” not “App Store”. Much to the chagrin of Google Inc. (NASDAQ:GOOG), Amazon launched its Android Appstore last week. Now, consumers can un-tether themselves from Google’s official Android Market, and download free and paid apps directly from an online retailer they’re already familiar with. Amazon stands to get a 30 percent cut of every paid app they sell. For the record, Google’s not the only one upset about the launch of Amazon’s Appstore. Apple Inc. (NASDAQ:AAPL), which has the name “App Store” trademarked, sued Amazon over its use of the word “Appstore.” Apparently, there are times when branding trumps the threat of litigation.

3) One nation under Kindle. The success of Amazon’s e-reader, the Kindle, has been remarkable. Amazon hasn’t released exact sales figures on the device, but it already sells more e-books than it does traditional paperbacks. “Since the start of the year, Amazon has sold 115 Kindle books for every 100 paperbacks,” PCWorld reported in January. The good times are rolling. In February, AT&T Inc. (NYSE:ATT) announced it would start carrying Kindles, and now there’s speculation that a new Kindle in the works will run on Google’s open-source Android operating system. That would have the power to transform the Kindle from an e-reader into a full-blown tablet computer that just might compete with Apple’s iPad.

4) For your fulfillment. Amazon’s shares took a tumble after the company reported weak revenue growth in its Q4 earnings report on Jan. 28. The numbers weren’t all that surprising to analysts, though, as the quarter’s traditionally weak for the online retailer, and Amazon’s in the process of expanding its fulfillment centers. “1Q margins are likely to disappoint but reflect the higher spend on fulfillment centers/IT needed to extend AMZN’s above-industry growth well into the future,” Youssef H. Squali, an analyst at Jefferies & Co., wrote in a note to clients. “We recommend purchase of AMZN especially on any dip.” Bigger fulfillment centers means better margins moving ahead, and – after the costs are absorbed – that should boost the company’s bottom line.

5) Growth in the People’s Republic. Amazon’s quietly been building its brand in China since acquiring the Chinese online bookseller Joyo.com in 2004. In 2007, Amazon changed the site’s name to Amazon.cn, and it’s now the 74th most-visited site in China, according to Alexa.com. That puts it just one slot behind one of its main competitors: the online bookseller and retailer E-Commerce China Dangdang Inc. (NYSE:DANG), which recently IPO’d in the U.S. and operates Dangdang.com. Even if Amazon doesn’t ultimately overtake DangDang.com, there’s more than enough e-commerce growth in China to grow Amazon’s coffers for years to come.

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1 thought on “Amazon stock analysis: 5 reasons to buy and hold in 2011 (AMZN)”

  1. I have a web site where I give investment advise on penny stocks and stocks under five dollars. I am not a fan of amazon. I think office max and office depot look like far better bargains here than amazon. I think office max 12.89 symbol {OMX} could easily reach 75.00 over the next five years. this is not a real high risk stock.

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