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The Amazon share price makes it an instant buy for me

Image source: Amazon

In 1997, the Amazon (NASDAQ:AMZN) share price was $18 (£13.97). Spotting that opportunity early and holding on until today would have made you pretty darn rich.

As of the end of July 2020, the Amazon share price has broken above $3,000 (£2327.80). That’s a 16,566% gain in total. So £1,000 invested in Amazon 23 years ago would give you £165,660 today.

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But even though I’d be paying 16,000% more for a single share now that when it debuted on the market, I still think the Amazon share price is an instant buy.

I’ll tell you why.

Amazon-ian proportions

Instead of beating yourself up about the now-gigantic share increases you missed, ask yourself this question: Will the Amazon share price continue to grow?

As Amazon is one of the biggest winners from the online shopping boom accelerated by the coronavirus, I think the obvious answer to that question is yes. Overwhelmingly so.

CEO Jeff Bezos started Amazon as a bookseller in his own garage, but the company has grown it has diversified extensively. Even aside from its gargantuan ecommerce arm, Amazon now controls a large portion of Internet infrastructure through Amazon Web Services (AWS).

And the Amazon share price benefits heavily from this side of the business. Selling server space, computing power, cloud data storage, and more, this is Amazon’s least visible product and yet brings in over 14% of the company’s revenue.

In the first three months of 2020, AWS surpassed a record $10bn in revenue.

And it is growing by around 30% every quarter.

As Bezos says: AWS is basically the utility company of the Internet. And it controls a third of the entire market, more than double its closest competitor.

When we talk about economies of scale, and Warren Buffett-inspired economic moats, this kind of market share with products few others can provide, is what we want to see.

How to buy Amazon

Beginner investors might want to spread their risk and buy a slice of a mutual fund that owns Amazon, alongside lots of other stocks and shares.

For example, Amazon is the largest holding in the FTSE 100-listed Scottish Mortgage Investment Trust. It’s over 8.2% of the entire fund.

But it’s simple enough to look up the Amazon share price one minute and buy it in a UK Stocks and Shares ISA the next.

For example, my Stocks and Shares ISA is with Hargreaves Landsdown. It’s not the cheapest, and other ISA providers are most certainly available. But all I had to do to start buying US-listed stocks and shares like Amazon is to fill in a form online called a W8-BEN. For me, it took about 10 minutes to complete. If you search on your ISA provider’s website you should be able to find this quite easily.

Once you’ve sent it off and had confirmation back from your ISA provider, you can start buying US stocks.

Amazon share price prediction

Analysts have a wide range of predictions for the Amazon share price, but on average they believe the company’s earnings will grow by 34% a year. And the median share price target for the next 12 months alone is $3,400.

The Amazon share price could easily be plumping up your portfolio well into the next decade.

Large companies don’t tend to grow this fast. No wonder it’s one of the most popular stocks in the world.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. TomRodgers has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Amazon and recommends the following options: short January 2022 $1940 calls on Amazon and long January 2022 $1920 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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