Amazon is a Seattle-based company that specialises in e-commerce, cloud computing, digital streaming and artificial intelligence. It is considered one of the “big five” U.S. tech companies, along with Alphabet (Google), Apple, Microsoft and Facebook.
Bezos founded Amazon out of his garage in July 1994. It initially focused on selling books, as Bezos realised that would allow the company to pull in a wealth of data on affluent consumers. It soon started to branch out into selling video games, consumer electronics, home improvement items, software, board games, and toys.
The company went public in May 1997 and continued to expand its range of products. In 1999, Time named Bezos its Person of the Year for his efforts in popularising online shopping. The firm launched Amazon Web Services in 2002, which would evolve into its highly lucrative cloud computing arm following the 2006 acquisition of Elastic Compute Cloud.
Amazon finally turned a profit for the first time in Q4 2001, earning $0.01 per share on revenues of more than $1 billion. It took another huge step forward by launching Amazon Marketplace, which allows third-party merchants to sell to Amazon customers. This now accounts for more than half of all sales on Amazon.
The company has expanded rapidly in recent years, snapping up Whole Foods, Twitch, Ring, Pill Pack and Zappos.com along the way. It is building a second HQ in Virginia at a cost of $2.5 billion, and it continues to invest heavily in AI and cloud capacity while building its own delivery service. It reported revenue of $386 billion in 2020, and net income of $21.3 billion, and it has around 800,000 employees spread across the globe. In 2021, Bezos announced he would step down as chief executive and transition to executive chair, with Andy Jassy taking over as chief executive.
Historical performance of Amazon stock
Amazon made its debut on the NASDAQ under the stock exchange symbol AMZN following its IPO in May 1997. It was initially priced at $18 per share, but it had surged to $105 by 1999 amid a frenzy of investing in the nascent tech sector, with three share splits taking place between 1998 and 1999. The tech bubble then burst, and Amazon’s share price had decreased to just $5.51 by October 2001.
Anyone that sold back then will be kicking themselves now. It rallied to around $22 by the end of 2002, but it took another seven years for AMZN to break back above the $100 mark, hitting a price of $119 in October 2009. It then went parabolic, soaring to more than $1,900 by September 2018.
A sharp economic downturn forced the price back below the $1,400 mark by December 2018, but it then rallied hard. It reached $2,000 for the first time in April 2020, as the Covid-19 pandemic was starting to force lockdowns across the globe, and it went on to hit a high of $3,552.25 later that year. AMZN has traded above $3,000 ever since.
Trading Amazon CFDs
A CFD (contract for difference) is a financial derivative that allows you to speculate on an asset rising or falling in value without taking ownership of the underlying asset. You can use CFDs to trade shares, funds, cryptocurrencies and more.
You start by taking a position on whether Amazon shares will rise or fall in price. If you believe its price will increase, you can go long on Amazon, which means you are buying contracts on it. If you think Amazon’s value will decrease, you can go short, acting as the seller in a CFD.
By taking out a CFD, the buyer agrees to pay the seller the difference between Amazon’s price at the start of the contract and Amazon’s price at the end of the contract. The more the price moves in your favour, the higher the profit you make. However, you will incur losses if the price moves against you, so you have to be careful and conduct thorough research before trading.
When you have registered for a free stock trading UK account with the best stock broker UK , you can visit the “Markets” page, head to the shares section and click on Amazon. You will see a chart detailing its recent performance, and you can either click “Go Short” or “Go Long”. The small difference between the selling price and the buy price is known as the spread, which is a universal feature at CFD trading sites.
Decide if you want to go short (sell) or go long (buy), choose the number of contracts you wish to buy and confirm the trade. You can close it when you are satisfied with its current position. If the price has moved in your favour, the difference will be credited to your account.
Trading Amazon CFDs
There are several benefits to trading Amazon CFDs:
- You do not need to hold actual shares of Amazon, which are very expensive to buy. A CFD allows you to simply speculate on its future price.
- You can go long or short. Traditional investors can only buy AMZN, hold onto it and hope to sell it for a profit at a later date.
- It provides you with the opportunity to make larger profits in the short term. Amazon is not a volatile asset like Bitcoin, and it is not prone to wild fluctuations, so you would probably need to buy a large number of shares in order to make several thousands of pounds in profit on a short-term basis. That is not the case with CFDs, as you can take out several contracts and capitalise upon the difference if the price moves in your favour.
- Stop-loss and take profit orders are available when you trade Amazon CFDs. A take profit order locks in a profit when the price of AMZN reaches a certain point, while a stop-loss order is a free insurance policy that prevents you from incurring losses past a specific point.
Predict price movements
Traders often use fundamental analysis, technical analysis or a combination of both in a bid to predict how Amazon stock will fare in the short term. Fundamental analysis can focus upon classic metrics such as the price to earnings ratio, price to book value and interest rates. You are essentially trying to work out if a stock is overvalued or undervalued.
You might be more inclined to focus on specific events that could cause the price to rise or fall on a particular day. For example, it might be set to unveil its latest quarterly reports, it might be launching a new service or there could be a vote on whether workers should form a union. The outcome of these events will have a direct bearing on the stock. You can also consider the wider economic and market situation and whether or not it favours Amazon.
Technical analysis focuses more heavily on volumes traded, the put-call ratio and so on. It seeks to identify historical trends that can provide an indication as to how the stock will perform in future. Analysts are ultimately trying to figure out whether a trend will continue or reverse, and when it might reverse. Before you buy Amazon shares UK, it might be worth conducting a combination of fundamental and technical analysis.
Future prospects for Amazon
“When somebody congratulates Amazon on a good quarter, I say thank you, but what I’m thinking to myself is those quarterly results were actually pretty much fully baked about three years ago,” said Bezos in one famous interview. His executive team is already working on what will happen several years into the future.
The company is investing in cashier-free stores, food delivery services, biometric payments, AI-powered home robots, innovative healthcare, self-driving cars and much more, while continuing to establish itself as a leading light within the cloud computing space. It is likely to continue prospering long into the future, but its share price will not go up in a straight line, and anyone trading Amazon CFDs will be focused on the short-term ebbs and flows caused by general sentiment, market conditions and specific events.