Is Amazon the best US stock that I could buy in 2021?

Amazon has dominant positions in fast-growing markets and the potential to enter more. I think Amazon stock can continue to impress its investors.

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If I had bought Amazon (NASDAQ: AMZN) stock on the first day of the new millennium, I would have been up 3,912% as 2021 rolled around. If I had waited until 2010 to get on board, the gain would have still been an eye-watering 2,300%. In 2020 alone, the Amazon share price went up by 74%.

It’s not just the share price that has been flying higher. Growth in Amazon’s underlying business has been equally impressive. In the first quarter of 2000, Amazon reported net sales of $574m. The latest quarterly report (Q3 2020) has Amazon’s net sales at $52,774m. Amazon has increased its quarterly revenue by 9,024% since the new millennium. In the same time, the company has gone from reporting a net loss of $0.3m to a profit of $6,331m.

If that kind of growth continues for the next decade, then Amazon has to be one of the best US stocks I could buy in 2021. The question is, will it continue?

Amazon: from A to Z

Investors must have asked themselves if Amazon could continue its rapid growth in 2010. From 2000 to 2010, Amazon took its quarterly net sales from $574m to $7,131m. That is a 1,143% increase in quarterly net sales, accompanied by a swing from loss to a quarterly profit of $299m. Investors who doubted Amazon’s ability to keep on growing in 2010 would have been very wrong.

In fact, the 2010s were a better decade than the 2000s. On average, net sales increased by 29% per year from 2000 to 2010. From 2010 to 2020, the average net sales growth was 45%. Amazon continued to expand its online presence in its core US market and exploded worldwide in the 2010s. Also, Amazon’s cloud computing division has grown rapidly.

So, what is there to suggest Amazon will continue its track record of impressive growth from now onwards? For one thing, the company is still dominant in the online shopping market, despite competition from brick and mortar retailers moving online. And the online shopping market is growing briskly, meaning Amazon does not have to gain market share to make gains.

The acquisition of Whole Foods brought Amazon into bricks-and-mortar retailing. Amazon Fresh, its online grocery arm, is experimenting with physical stores by buying up real estate from bankrupt retailers. Towards the end of 2020, Amazon announced it would open an online pharmacy in the US. Amazon users can now order pretty much everything they need, from A to Z, and have it delivered without having to step out the door.

It’s still day one for Amazon stock

Amazon Web Services, its cloud-computing division, is in a dominant position in another fast-growing market. Original content, and now live sports, should promote Amazon Prime Video as a service in of itself, and not just a benefit of a Prime Membership. Again, the streaming market is fast growing.

I could go on, particularly about the potential for dominating the voice Internet search market due to Amazon Alexa’s ubiquity and, but suffice it to say, I am confident Amazon will continue to grow. And the company should become more profitable if recent trends are anything to go by: gross, operating, and net income margins have all increased over the last five years.

Although I cannot say that Amazon is the best US stock I could buy for 2021, I do think it is one of them.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. James J. McCombie owns shares in Amazon. The Motley Fool UK owns shares of and has recommended Amazon and recommends the following options: long January 2022 $1920 calls on Amazon and short January 2022 $1940 calls on Amazon. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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