Think about online shopping; the first thing that probably comes to mind is Amazon. Such is the mind space this company occupies.
From the time of its IPO till today, the stock has surged by more than 150,000%, giving life-changing returns to its shareholders. And with Amazon venturing into new businesses as well, the price seems to be looking upwards.
So, wondering how to buy Amazon shares in India? Read on to know more.
Is investing in Amazon a good idea?
Launched in 1994 as Cadabra Inc, the name Amazon we know today came into existence in 1995. Amazon went public in May 1997 with an initial listing price of $18.00. This translated to $0.075 when adjusted for the stock splits that occurred on June 2, 1998 (2-for-1 split), January 5, 1999 (3-for-1 split), and September 1, 1999 (2-for-1 split), and June 3, 2022 (20-for-1 split).
The end of Q1 2022 saw the stock price at $166.45 with a market cap of $ 1.23 trillion. It is easy to understand the massive wealth it has generated for itself and its investors in the 25 years of its public existence, with the share price, which has gone up by over 170,000%.
The current fall (YTD -33%) might be a good opportunity to enter the stock as most MTM losses on stock investments have already been accounted for, and earnings are expected to improve further. So, let’s find out how you can invest in Amazon shares in India.
For FY2021, Amazon earned a revenue of $469.82 Bn. This was higher by 22% compared with FY2020. Its revenue from the online store segment was $222 Bn, and from the third-party seller services segment was $103 Bn.
Its FY2021 revenue from the North American region specifically shot up by 18%, whereas the international segment rose by 22%. The net income was up by 56% to $33.36 Bn. Below is Amazon’s performance for the year ending 31st December 2021.
Source: Google Finance
Amazon’s gross and net profit revenue has consistently increased since FY 2018. According to the statement provided below, its revenue has more than doubled from $232,887 Mn in 2018 to $469,822 Mn in 2021.
Furthermore, the net income increased more than three times in 3 years, from $10,073 Mn in 2018 to $33,364 Mn in 2021. This indicates that the expenses of Amazon were optimized and that directly improved the profitability of its operations.
The performance of the first declared quarter of the current year shows this continued trend in performance with marginally better numbers Quarter-on-Quarter.
Talking about the assets, the following is the extract of Amazon’s comparative Balance Sheet for the last four years from 2018 to 2021. The statement shows that its assets increased from $162,468 Mn in 2018 to $420,549 Mn in 2021. Its liabilities went up as well from $119,099 Mn in 2018 to $282,304 Mn in 2021.
However, the equity rose from $43,549 Mn to $138,245 Mn during the same period. 2022 seems to have started well for Amazon, as is visible in the balance for the Q1 ending in Mar 2022.
No analysis is complete without checking out the cash flow data. Here, the performance of Amazon wasn’t appreciable for FY 2021. Cash flow from operating activities was $66,064 Mn in 2020, but in 2021 it came down to $46,327 Mn.
Similarly, investing activities had a negative cash flow of $58,152 Mn. On the other hand, cash flows from financing activities turned into a positive $6,291 Mn in 2021 from -$1,104 Mn in 2020.
However, the net cash flow for FY 2021 stood at -$5,900 Mn. The statement below displays the comparative cash flows from 2018 to 2021 and Q1 of 2022, showing a positive net cash change.
Though the Amazon stock contributed multifold returns to investors’ wealth since its listing, its 5-years returns were about 246%, very high but a bit pale in comparison to its long-term historical returns.
The stock had seen another set of rallies during the global lockdown as many turned towards its e-commerce business for a safe purchasing experience and its online streaming platform for entertainment.
However, since the overall market is witnessing a correction, Amazon stock also has seen some selling pressure. Its year-to-date (YTD) return is negative 13.21%, whereas the one-year return is negative 0.66%. The stock is currently trading at $ 114.81 and, backed by its strong fundamentals as displayed in the previous section, shows all signs of rallying back.
Source: Google Finance
The main question arises – is it a good idea to buy Amazon shares in India stock right now? When markets turn jittery, the wise investment strategy is to select fundamentally strong stocks. Though purchasing stocks for the short term may not be the best idea. Temporary downfalls like geopolitical tensions and inflation can induce panic, which may cause you to trade at a loss.
Why Should You Invest In Amazon Shares From India?
All investors begin their journey of investing in the financial markets with a clear intention to grow wealth. While the historical data suggests that the U.S. stock markets have delivered superior returns compared to the Indian markets, a very apparent reason to invest in U.S.-based Amazon is to grow wealth and earn a higher return on investment.
However, apart from that, you should consider investing in Amazon for several other reasons. Here they are –
Because it’s Amazon!: With valuation on the way to $2 trillion mark, Amazon is successfully growing investors’ wealth at the same speed at which its business has been growing over the years, making it a forerunner with global analysts and investors.
Moreover, Amazon is not just about e-commerce. Amazon Web Services (AWS) is an Amazon Inc subsidiary providing on-demand cloud solutions with annual revenue of $62 billion of its own. With its might of cash flow, Amazon can branch out into any sector and make a mark there, as shown by AWS.
Forex Advantage: As we know, the U.S. Dollar (USD) is one of the most powerful currencies in the world. Even if you invested in the American Dollar when it was about Rs. 60 per USD, you would have made a return of over 26% by the time it reached the mark of Rs. 76.
Now imagine investing in a U.S. stock that appreciates along with the dollar appreciation. It gives a double advantage to Indian investors.
Diversification: We know that diversification reduces risks and optimizes the overall profitability of the portfolio. Another great way to diversify your portfolio is to invest in markets other than Indian ones.
As U.S. stock markets offer higher returns, with Amazon being one of the well-performing companies in the U.S., you can consider diversification by investing in this multinational tech giant.
Timing: Earning handsome returns is not a game of chance but carefully planned and timed moves. Considering the massive juggernaut that Amazon is, its deep cash reserves and its global presence, it might just be a matter of time before it sails back to its glory.
In the meantime, though, it is reasonably priced and, with the recent stock split, has become far more affordable.
How to invest in Amazon from India?
Now that you have understood the benefits and advantages of Amazon stock, here’s how to invest in Amazon shares from India:
Direct Stock Investment: Stockal allows you to buy Amazon shares in India directly by the means of fractional investing. Keep these steps in mind while doing so:
Identify your risk appetite: Investment in the stock market comes with its own set of risks and associated rewards. Understand your risk profile and breakaway points so as to get the best returns without jeopardizing your corpus.
Select an investment medium: Investing in US stocks does not have as many mediums as investing in Indian stock exchanges. Choose your medium after careful evaluation of the terms and conditions and costs involved.
Decide the quantum of investment: Choose the amount to invest according to your risk appetite, investment goals, and time horizon. Stockal allows you to invest fractionally, entirely based on your budget.
Place the order: After completing all the above steps and opening an account with the chosen medium, you can go ahead and place your order.
ETFs: If you’re unfamiliar with the concepts of stock trading or unwilling to invest the time and effort needed to invest directly, then Exchange Traded Funds might be more suitable for you. Choose an ETF that includes Amazon in its holding or an ETF that tracks the sector/index that Amazon is a part of.
Basket Stacks: An innovative way to invest in Amazon is via curated basket stacks by Stockal. These are designed by renowned experts, hedge funds, and/or global asset management companies and include a collection of stocks / ETFs for you to invest in with a single click.
Mutual Funds: Just like ETFs, mutual funds too are a good way to invest without having to track your holdings regularly, as the fund manager does that for you. Another benefit is that mutual funds give the option to invest in Amazon in small, regular amounts via a SIP. However, it offers limited liquidity, and you cannot trade them directly on the stock market.
If you’re still thinking about how to buy Amazon shares in India and which is the best way to do so, then know that the most rewarding way is the one that is the most direct. This gives you higher control over your investment and is usually the lowest costing method for those with moderate risk-taking ability.
If these suit you fine, then consider investing in Amazon shares directly through Stockal or choose a basket stack that will help you invest in multiple tech shares simultaneously.
Stockal offers you the benefits of a seamless onboarding process, a robust and secure platform, and timely alerts and analysis. To learn more, you can visit Stockal’s website here.
- How can I invest in FAANG stocks from India?
Stockal will enable you to buy US stocks from India and help you through different stages of the process. From Remitting funds to the US and Tax implications. For further information, please read “How to invest in FAANG?”
- Tax implications of investing in the US?
Tax is applied on the dividends received from stocks and capital gains. Although the US does not tax Capital gains earned by selling a stock held for more than 24 months, the gains are taxed in India. For further information, please read “Tax implications for Indians who invest in U.S. stocks”
- Is it possible to invest in a basket of stocks like Amazon?
Yes! They are called stacks. Stacks are curated theme-based investing, which helps reduce risk by diversification and increase return by focusing on a growth sector. For further details please read “A Complete Guide to Understand Stacks – An investment portfolio”