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Amazon (NASDAQ: AMZN) stocks were one of the big winners of the pandemic as online retail exploded in a world where home orders became commonplace. However, as public health restrictions were relaxed, the e-commerce giant turned over all those profits. The company lost more than half its value in 2022.
With Amazon’s stock price stuck below $100 for the past few days, I felt a bargain and invested in the company for the first time. Time will tell if it was a success.
But how much would you have now if you had invested $1,000 half a decade ago? We are going to explore.
return of five years
As the five-year chart below shows, Amazon’s pandemic boom was swift. The stock then leveled off for around 18 months before sinking to current levels. It’s been quite the journey for long-term shareholders, to say the least.
Five years ago, Amazon shares cost $70.26 each. So, with $1,000 to invest, I could have bought 14 shares, leaving me $16.36 as spare change.
At the current share price of $97.24, my position would be worth $1,361.36. Despite the roller coaster, it’s still a respectable 38% return over five years.
Over that time period, however, the stock’s reputation as an investment to beat the market has taken a bit of a tarnish. For context, the S&P 500 the index advanced 52% since 2018.
Also, Amazon is not a good fit for passive income seekers. The company does not pay dividends, so I would have no additional payments to add to my total return.
Another thing to keep in mind is that as a British investor, I would have benefited from the depreciation of the British pound against the dollar over the past five years. Consequently, when converted to pounds, my return would be higher than my calculations measured in dollars suggest.
Currency risk is a factor I consider when investing in US stocks. While that would have worked in my favor for the past half decade, that won’t necessarily be the case going forward.
The outlook for Amazon shares
So is Amazon a good investment today?
At first glance, there are still some dark clouds on the horizon. The company recently announced 9,000 job cuts to bring the 2023 total to 27,000 layoffs. Efforts to optimize the business could boost results, but there is a risk that this will affect the quality of service that customers have become accustomed to.
However, fourth-quarter sales exceeded Wall Street expectations. The 9% growth brought the total to £121bn. Additionally, Amazon Web Services continues to show positive momentum, posting a 20% increase in sales; however, this was the lowest rate of expansion for the division in the company’s history.
So it’s fair to say that the financial picture is mixed. That being said, I am optimistic about the company’s long-term prospects. Amazon has embarked on a decades-long investment program in logistics infrastructure, putting it in a good position to benefit should consumer confidence improve.
In addition, its advertising and cloud computing divisions show residual strength, despite a slowdown in the growth rate. Overall, the risk/reward profile looks reasonably attractive to me after a big drop in stock price, but there are plenty of challenges ahead.
I recently took a small position in the stock and will closely monitor this year’s financial results for evidence that the bullish argument remains intact.
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