Amazon’s (NASDAQ:AMZN) secret sauce lies in its diverse business model that has kept profit margins high and revenue flowing. While many companies saw their demise in the throes of the pandemic, Amazon remains the leader among tech giants with its record-breaking quarterly earnings. But with shares trending at a whopping $3,294.62, is AMZN stock still a good buy?
Amazon saw some unprecedented gains during the pandemic-induced e-commerce boom and the company shows no signs of stopping anytime soon. With the launch of a number of exciting new products like a health and wellness tracker and an online-only grocery store, Amazon is a stock that’s worth paying for even at its current premium.
E-Groceries Will Boost AMZN Stock
After much anticipation, Amazon finally unveiled its first Whole Foods online-only grocery store. While the project had been in the works long before the pandemic, the timing could not have been better as the number of people shopping for groceries online tripled this year.
On the surface, the grocery store looks just like any other with aisles lined with products and produce. However, only Amazon employees will be allowed to enter the store to fulfill e-grocery orders for delivery in the area.
Since acquiring Whole Foods in 2017, Amazon has not leveraged the brand to strengthen its position in the grocery market besides giving Prime members free delivery and discounts. However, the company’s foray into the “ghost delivery” program will give it a huge competitive advantage.
The online-only Whole Foods could speed up delivery as shoppers will no longer have to push their carts along aisles. An e-grocery could also streamline inventory management and ensure that products never go out of stock. More importantly, the store ultimately acts as a fulfillment center which can help Amazon lower the costs associated with online delivery.
Amazon’s first Ghost Grocery based in Brooklyn could be the first of many if the business model proves to be a success.
Amazon’s Halo Effect
Wearable technology has always been Apple’s (NASDAQ:AAPL) area of expertise but in late August Amazon made its first major play in this market. The Amazon Halo, a health and wellness tracker is a slim wristband that packs in everything a wellness tracker does and more.
In addition to regular features like cardio, heart rate, sleep and temperature, the Halo has two new features that give this product its exclusivity. The “Tone” feature allows the app to monitor the user’s social and emotional well-being. A microphone will listen to the user’s voice and offer insights on their emotional state. The second feature “Body” will create a 3-D image scan of the user’s body and use AI to calculate the body-fat percentage.
Unlike Apple and Fitbit (NYSE:FIT) Amazon Halo comes with no screen and users’ stats will be stored on an app separate from the user’s Prime account. Amazon is breaking norms in the market by charging users a $4 monthly subscription plan.
Spending on wearable technology in the U.S is currently over $52 billion and Amazon’s foray into this space could be a gamechanger if the Halo is successful. It could also complement the tech giant’s existing ventures in the healthcare space. Nevertheless, Amazon has a lot of catching up to do if it hopes to compete with Apple that controls 34.2% of the market.
The Bottom Line On Amazon
Despite putting up some outstanding results in Q2, AMZN stock still has plenty of room to grow. The e-commerce boom of 2020 was largely a result of the pandemic but the trend is likely to make permanent changes to the business landscape as we know it. As Amazon continues to make some big plays in this sector, its earnings are likely to be higher in the months and years to come.
The tech giant’s venture into Ghost Groceries and wearable technology is a testament to the company’s ability to take existing technology and add its own spin to it. This innovative quality will keep Amazon in the spotlight in any economic environment. Although the company’s share price can seem high relative to earnings, it remains a worthy investment for even greater growth in the long-term.
Divya Premkumar has a finance degree from the University of Houston, Texas. She is a financial writer and analyst who has written stories on various financial topics from investing to personal finance. Divya has been writing for InvestorPlace since 2020. On the date of publication, Divya Premkumar did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
