How to Buy Amazon Stock in 2023: A Small Business Owner‘s Guide

As a small business owner and entrepreneurship consultant, I regularly help clients analyze stocks and make smart investments to grow their wealth. One question I often get asked is how to buy Amazon stock.

With Amazon consistently dominating the online retail space and expanding into new sectors, it‘s no surprise investors big and small want a piece of the action. But before you purchase Amazon shares, there are some important factors to consider.

In this detailed guide, I‘ll provide key information for small business owners on buying Amazon stock in 2023, from choosing a brokerage to placing your first trade.

A Look at Amazon Stock‘s Performance

First, let‘s examine how Amazon‘s stock (AMZN) has performed historically:

  • Over the past 5 years, AMZN has delivered a massive 234% return compared to the S&P 500‘s 59% return.
  • In 2022, despite broader market volatility, AMZN has only fallen -28% vs -20% for the S&P 500.
  • AMZN hit an all-time high of $3,773 per share in July 2022 before declining. Its current P/E ratio is 104.

Table: Amazon‘s Valuation Metrics Over Time

Year P/E Ratio PEG Ratio EPS
2017 307.06 6.23 $6.15
2018 96.22 2.49 $20.14
2019 76.24 2.24 $23.01
2020 91.64 5.54 $41.83
2021 64.81 3.67 $64.81
2022 104.21 4.2* $3.58**

*Projected full year
**Trailing twelve months

This table shows that while Amazon‘s P/E ratio was sky-high in 2017, it has since cooled to more reasonable levels as the company‘s profits expand. The PEG ratio also indicates solid growth potential.

Clearly, Amazon stock has offered stellar returns, but past performance doesn‘t guarantee future gains. So let‘s examine the bull and bear case for AMZN in 2023.

The Bull Case for Buying AMZN

Here are some reasons why Amazon stock could continue to climb higher:

  • Dominant ecommerce share – Amazon controls 38% of US online retail and continues gaining market share.
  • Rapid growth of higher margin businesses – AWS cloud, advertising, and merchant services are growing quickly at 70%, 30%, and 34% respectively.
  • Expansion into new industries – Amazon is just getting started in telehealth, self-driving vehicles, robotics, and more. Huge potential markets.
  • Strong tailwinds from digital transformation – More retail and enterprise spending continues shifting online, benefiting Amazon.

If Amazon can maintain growth and profitability, especially in cloud, advertising, subscriptions, and other high margin units, its stock could have room to run.

The Bear Case Against Buying AMZN

However, there are also risks to consider:

  • Loss of pandemic-related tailwinds – Amazon‘s growth surge in 2020 and 2021 isn‘t likely to repeat post-COVID.
  • Increased costs and shrinking margins – Investments in fulfillment, wages, supply chain, and more are impacting margins.
  • Growing regulatory scrutiny – Governments are placing more focus on antitrust issues for big tech companies.
  • Fierce ecommerce competition – Walmart, Target, Shopify, and others aren‘t letting Amazon win easily.

Amazon bulls believe its dominance and expansion into new industries will drive future growth. Bears see shrinking margins and rising costs, along with competitive and regulatory threats, slowing Amazon down.

Should Small Business Owners Buy Amazon Stock?

Now you understand Amazon‘s stock performance and bull/bear arguments. But should small business owners look to buy AMZN stock specifically? Here are some things to consider:

Pros

  • Strong long-term growth potential
  • Low correlation to broader economy
  • Diversification from your own business revenue
  • Can be purchased through retirement accounts

Cons

  • High valuation and volatility
  • Possible conflicts as a seller on Amazon Marketplace
  • Adds exposure to a competitor‘s performance

Ultimately, it depends on your own business model, investment goals, time horizon, and risk tolerance. Many small ecommerce businesses thrive by selling through Amazon Marketplace, making AMZN indirectly integral to their success. For them, investing modestly in Amazon stock as a "frenemy" hedge could make strategic sense.

How to Buy Amazon Stock in 4 Steps

If you decide Amazon fits your investment strategy, here‘s an overview of what‘s needed to become a shareholder:

1. Choose an online brokerage

Select a reputable, low-cost broker like Fidelity, Charles Schwab, or Vanguard. Compare commissions, fees, and account minimums.

2. Open your brokerage account

Complete the application and fund your account. Retirement accounts like IRAs allow tax-deferred investing.

3. Analyze Amazon stock

Use your broker‘s research tools to analyze financials, charts, valuation, newssentiment.

4. Place your trade order

Enter the stock ticker "AMZN" and order parameters like shares and order type.

Once your purchase is complete, you‘ll own shares in Amazon! Be sure to monitor your investment closely.

5 Small Investor Tips

For entrepreneurs buying just a few shares, here are some tips:

  • Start small – don‘t invest more than you can afford to lose.
  • Use limit orders, not market orders.
  • Reinvest dividends to compound returns.
  • Maintain a long-term mindset measured in years.
  • Diversify into an index fund, bonds, or other assets.

While rewards can be great, investing in individual stocks is riskier than funds. Do thorough research before buying.

Ready to Become an Amazon Shareholder?

I hope this guide empowers you to make informed decisions about buying Amazon stock. Let me know if you have any other questions! I‘m always happy to help small business owners invest for growth and success.