How to Buy Amazon Stock – A Comprehensive Walkthrough for Beginning Investors

Amazon‘s meteoric expansion from online bookseller to e-commerce titan and cloud computing juggernaut represents one of the most dramatic growth stories in business history. As Amazon continues innovating across sectors, more investors recognize the long-term upside of owning this dominant company‘s stock.

But buying individual stocks can be intimidating without a roadmap. This comprehensive guide will walk you through everything needed to make educated Amazon stock purchases aligned with your financial goals.

The Impressive Rise of Amazon

To appreciate why so many investors are bullish on Amazon, it helps to understand the incredible 25-year journey that has unfolded:

1995 – Former hedge fund VP Jeff Bezos founded Amazon as an online book retailer out of his Seattle garage on July 5th.

1997 – Amazon went public at an IPO price of $18 per share, raising $54 million in funding. The hot startup stocks trades under the NASDAQ ticker AMZN.

2002 – The company finally achieves its first profitable year after the dot com burst. Stock prices had cratered to a post-bubble low of $5.51 per share in 2001.

2005 – Amazon Prime loyalty program launches, providing free 2-day shipping and transforming consumer expectations about online retail convenience and speed.

2006 – Amazon Web Services (AWS) initiated, leveraging the company‘s robust cloud infrastructure to let businesses access computing, storage, databases and other tools via the internet.

2007 – Kindle e-reader device introduced, ushering in Amazon‘s successful forays into hardware such as tablets, streaming devices and smart speakers in later years.

2017 – Amazon acquires Whole Foods for $13.7 billion as the company sets its sight on physical grocery retail and integrating these locations for online order fulfillment.

2022 – Amazon hits record-high $486 per share and crosses $1 trillion in market value. Net sales increased 22% year-over-year to $514 billion across global e-commerce properties, AWS, third-party seller services, subscriptions, and advertising.

This abbreviated history illustrates Amazon‘s relentless appetite for entering and dominating new market sectors beyond books and online retail.

So why does Amazon represent an appealing investment opportunity?

Top 3 Reasons to Invest in Amazon

1. Above-Average Revenue Growth Across Diverse Segments

• Amazon increased overall annual net sales by an astounding 20%+ every year for over two decades.

• The company currently operates across five business segments – online and physical stores, third-party seller services, Amazon Web Services (AWS), advertising, and subscriptions.

• Dominates numerous retail sectors while expanding globally. Claims over 40% of all US ecommerce sales. Owns majority grocery delivery market share since acquiring Whole Foods.

• Cloud computing leader AWS makes up over 15% of Amazon‘s total sales but over 50% of its profits – demonstrating the earnings power of Amazon‘s higher-margin cloud business.

In short, Amazon has established itself as an essential infrastructure company that continues growing at an above-average pace across more industries than any rival.

2. Solid Historical Stock Price Gains

• Despite some extreme volatility surrounding the early 2000s dot-com bubble and 2008/2020 economic crises, Amazon stock has richly rewarded long-term shareholders.

• Over the past 5 years, Amazon has delivered an average annual return around 29% – significantly higher than S&P 500 index funds.

• Anyone investing in Amazon stock 20 years ago would have seen their money grow over 2,700% in value after splits and appreciations.

Of course, past returns don‘t guarantee future gains. But they illustrate the upside shareholders have enjoyed.

3. Future Growth Runway Remains Strong

Amazon has large addressable markets still to penetrate deeper globally:

• eCommerce – Roughly 14% of total US retail spend happens online. Amazon can grow its 40% share of online spending while the entire e-commerce pie expands over time.

• Cloud Services – Despite commanding over 40% market share already, AWS cloud revenues are projected to climb nearly 20% over the next 5 years.

• Digital Advertising – Amazon‘s nascent but fast-growing ad business represents only 4% share of the $500B+ global digital ad market dominated by Google, Meta and others. But with more shoppers turning to Amazon instead of search engines for product queries, their ad capabilities carry huge potential.

• International – Currently only one-third of sales are international, signaling substantial room for geographic growth, especially in India where Amazon plans to invest $10B+.

With projected net sales potentially reaching $2 trillion by 2035 according to analysis by ARK Invest, Amazon appears poised for sustained growth for years ahead – making it a worthy investment.

Now that the strengths of Amazon stock have been demonstrated, let‘s examine how to become a shareholder…

Step-by-Step Guide to Buying Amazon Stock

While Amazon‘s scale may seem intimidating, the process of buying shares is accessible to everyday investors. Follow these steps:

1. Select a Brokerage Firm

The easiest way to purchase stocks is opening an online brokerage account. Some top picks include:

• Fidelity – Popular full-services broker with $0 trades, reputable tools and guidance.

• Charles Schwab – Leading discount broker offering $0 stock trades, research tools, banking services.

• TD Ameritrade – Feature-rich broker good for new investors. Offers 100+ commission-free ETFs.

• ETRADE* – Trusted broker with easy-to-use platform, customizable dashboard and mobile apps.

• Robinhood – Barebones but cost-effective app empowering commission-free trading.

Compare each broker‘s features, reputation, account minimums and fees to decide what matches your preferences as an investor.

2. Open a Brokerage Account

Submit an application online or mobile app to open a taxable brokerage account with your chosen provider. Approval is typically instant.

You‘ll need to provide:

• Personal details (name, DOB, address)
• Social Security Number
• Employment and income verification
• Review and electronically sign account terms and agreements

Fund your account via methods like bank transfer, wire transfer or depositing a check. Some brokers even offer signup bonuses.

3. Determine Your Order Type

Once your brokerage account is open, you‘ll need to decide whether to place a market order or limit order for Amazon shares:

• Market Order – Agree to buy Amazon stock at the best prevailing market price when your trade executes. Offers certainty your order will be filled but not the exact buy price.

• Limit Order – Set a maximum price you‘re willing to pay for each AMZN share. Provides control over purchase price but your trade may not execute if market rate surpasses your limit.

Market orders provide execution assurance while limit orders promise better price control. Either can make sense depending on your priority as the buyer.

4. Enter Your Trade Details

When ready, access your account and enter key details to buy shares:

• Ticker Symbol: AMZN
• Order Action: Buy
• Share Quantity (ex. 5 shares)
• Order Type: Market or Limit (with max price per share if limit)
• Expiration: Choose same-day, good-for 30 days, until canceled etc.

Review all purchase details carefully before submitting to avoid mistakes!

Once complete, congratulations – you officially own Amazon common stock! Now let‘s explore important factors investors must assess before buying…

Key Analysis to Make Informed Amazon Stock Purchases

While predominantly positive in its outlook, every investment comes with some risk. Conducting thorough due diligence across these areas lets you make educated buy decisions:

Analyze Financial Health Stats

As an investor, you essentially become a partial owner entitled to share profits and losses. So assessing financial statements should greatly inform your investing strategy and risk comfort.

Evaluate key Amazon metrics across these vital reports to gauge overall fiscal fitness:

Earnings Reports

• Net Sales Growth
• Net Income Growth
• EPS (Earnings per Share)
• Profit Margins

Balance Sheet

• Assets/Liabilities
• Debt Levels
• Cash Flow

For example, seeing accelerating profits on strengthening margins indicates management‘s operational execution and pricing power in the market. While low or worsening figures may reflect competitive challenges ahead requiring closer assessment before investing significantly.

Compare Against Competing Firms

While clearly the dominant player, Amazon competes across overlapping markets with major companies like:

• Walmart – Retail, Delivery, Advertising
• Microsoft Azure – Cloud Infrastructure
• Shopify – eCommerce Services
• Netflix – Video Streaming
• FedEx, UPS – Logistics, Delivery
• Google – Product Search, Digital Ads
• Target – General Merchandise Retail

Analyze how Amazon‘s financial metrics and market positioning compare side-by-side with key competitors:

The above table demonstrates that while Amazon competes against corporations with impressive strengths of their own, it remains the outright market leader in areas like online retail and cloud infrastructure while producing comparable profitability on just a fraction of competitors‘ revenue – highlighting Amazon‘s immense earnings efficiency.

Of course, monitoring competitor moves factors into prudent investment decisions as well since erosion of Amazon‘s competitive moats could greatly dim financial outlooks. But presently, Bezos & Co. appear well-positioned.

Determine Investor Type

Amazon offers different value propositions depending on an investor‘s market strategy:

Growth Investor

• Bullish on sectors like cloud computing and ecommerce
• Buys stocks with strong earnings trajectories
• Willing to pay premium valuations for disruptive brands
• Judges Amazon as having substantial growth runway

Value Investor

• Seeks discounted stocks trading below inherent value
• Concerns over Amazon‘s high valuation multiples
• But AWS and ad performance still offer stability
• Requires patience and discipline when timing entry points

Income Investor

• Focused on dividend-paying stocks
• Amazon pays no dividends currently
• Prefers less volatile, slow-growth companies
• Amazon doesn‘t suit this lower-risk approach

So an aggressive growth investor may be more inclined towards Amazon stock compared to value or dividend investors – but all can benefit from Amazon indirectly through ETFs containing AMZN.

Gauge Risk Tolerance

All equity investing involves uncertainty. And purchasing shares of innovative tech disrupters like Amazon will produce especially turbulent price swings.

Assess personal factors like:

• Income – Can you financially withstand potential 20-30% pullbacks?
• Time Horizon – Will you need this money in 5+ years?
• Age – Younger investors can endure more risk.
• Existing Assets – Amazon may already be sufficiently represented across current holdings.

And determine overall appetite for the foreseeable risks facing Amazon like:

• Prolonged economic downturn shrinking consumer spending
• Higher AWS cloud competition from Microsoft and Google
• Government regulation of Big Tech market power
• Failure of new initiatives like pharmacy, healthcare

Assigning percentage probabilities combined with preparedness for downside lets one make suitable investing choices. The future remains unpredictable so staying rational about risk vectors matters.

Ready to Become an Amazon Shareholder?

I hope this comprehensive guide has equipped prospective investors with greater insight into adding Amazon stock as a portfolio component. Conducting personal financial planning while understanding Amazon‘s operational model and growth trajectory allows for informed buy decisions.

Ultimately Amazon represents much more than a simple e-commerce retailer as its cloud dominance and new expansions build substantial wealth creation runways. While risks always exist with stocks, Amazon‘s 25-year track record suggests its next quarter century should reward patient, long-term shareholders.

Here‘s to growing your net worth alongside one of history‘s boldest innovators!