Home > Amazon Keeps Pushing Higher – What Drives the Price Action?

Amazon Keeps Pushing Higher – What Drives the Price Action?

August 19, 2020 By Mircea Vasiu

Amazon closed yesterday 4.09% higher on the general stock market frenzy. Investors keep pouring money into the stock market, with technology companies being their favorites.

Since the pandemic started, Amazon is one of the companies that flourished. It hired hundreds of thousands of people and plans to hire some more. Its online store’s performance exceeded the wildest expectations as people trapped inside their houses spent more time (and money) on online goods and services.

Challenges and Opportunities Ahead

Amazon always pushed things to extreme. It was one of the first companies to expand into the cloud business, and now its AWS is one of its growth engines. It continues to expand across America and internationally. It is one of the first companies to have ordered a fleet of hundreds of electric trucks to use on its American operations. And so on.

Investors tend to reward performance by buying a company’s shares. In the case of Amazon, the stock price sits close to its record high, moving comfortably above the $3,000 level.

Since the beginning, Bezos emphasized a strong focus on the customer. It remained in Amazon’s core culture to this day. It recently surfaced that Amazon pushes third party merchants for faster deliveries. It has the power and the means to squeeze small businesses to adapt to Amazon standards.

And Amazon has some very high standards. Only in the last few years, it started to make public the number of Prime members. The investing world was shocked to find out that hundreds of millions of customers prefer to pay a fee for faster delivery mainly.

Few are aware of Amazon’s recent entry into the world of digital advertising. It challenges the dominance of companies like Facebook and Google, and already stole a big chunk of that market.

On the flip side, the company faces antitrust probes. In a way, it is only normal for a company of this size to trigger regulatory screening. Only recently, the big tech companies were summoned in front of the U.S. Senate in an anti monopoly hearing. Germany’s Federal Cartel Office is also probing the way Amazon is treating its third-party merchants on the platform. But again, such concerns are normal for a company this big and so diverse.

For investors, the bottom line (i.e. net income) is the one that matters. As long as it keeps growing, Amazon’s share price will continue to outperform.

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