Did you know that Amazon reported total revenue of £90 billion and a total profit of £7 billion in Q1 2021? Amazon’s profit figure reflects a jaw-dropping 220% year-on-year increase from the same quarter in 2020.
Astonishingly, the company made such growth when businesses worldwide struggled to survive amidst the Covid 19 pandemic and supply chain disruptions. You can tell from this figure that Amazon may be a good company for you to invest in in the UK. At least, it’s worth considering.
However, it is wise to do a lot of homework and financial risk analysis before you invest. This post will help you know details on Amazon UK investment. You will also learn what factors to evaluate if you want to invest in Amazon UK and how to buy Amazon shares in the UK.
Table of Contents
Understanding Amazon: Company Background
Amazon is currently the world’s largest online retailer. The company started as an online bookstore in 1994 and has since grown to become the behemoth it is today, with interests in various sectors, including, but not limited to, cloud computing, consumer electronics, digital streaming, and artificial intelligence.
Let’s quickly go through Amazon’s services, portfolio, and revenue sources, as this is one of the fundamental things you should know before making an investment decision.
Since the beginning of its eCommerce journey, Amazon has relied on retail sales as the primary source of revenue until 2020. The retail sales mainly come from Amazon.com and third-party seller services.
Although the revenue growth from retail sales has slowed down recently due to strong competition and Amazon’s increasing focus on developing other revenue streams, it still contributed to nearly 60% of Amazon’s 2021 annual revenue, according to Statista’s analysis of Amazon’s revenue segment.
Subscription services are the second-largest revenue source for Amazon. It includes services like Amazon Prime, Kindle Unlimited, Music Unlimited, and Audible. Amazon Prime is the company’s most popular subscription service.
It offers free two-day shipping, streaming of movies and TV shows, and other benefits to its subscribers. As of April 2021, Amazon Prime had over 200 million subscribers worldwide. Amazon reported total revenue of £26 billion from its subscription services in 2021.
Amazon Web Services (AWS)
AWS is Amazon’s cloud computing platform. It offers services like storage, databases, networking, analytics, development tools, and more to businesses and organisations.
AWS is one of the largest revenue sources for Amazon, accounting for 16% of the company’s total revenue as reported in the second quarter of 2022.
Amazon’s advertising business includes both search and display advertising on its various platforms, including Amazon.com, Amazon-owned websites, and third-party websites.
Amazon’s advertising business is one of the company’s fastest-growing revenue sources, as Amazon reported its quarterly advertising revenue as £7.5 billion, according to Bloomberg.
Amazon’s In-House Product Line Up
The key reason for this massive growth is that Amazon keeps on innovating and expanding its business model to new areas. Apart from AWS, here are some examples of successful product innovations they have made in the past:
- Prime Video: Amazon introduced Prime Video as a Netflix competitor in 2006. And in a very short time, it became one of the most popular video-streaming platforms.
- Alexa: Launched in 2014, Alexa is Amazon’s voice assistant. It is now available in various Amazon devices like Fire TV, Echo, and Dot.
- Whole Foods: Amazon acquired Whole Foods in 2017 for $13.7 billion. It was a strategic move to enter the grocery business and compete with Walmart.
- Amazon Go: It is a new type of retail store from Amazon, where customers can just walk in, pick up the items they want, and walk out. There are no checkouts or lines.
- Kindle: Kindle was launched in 2007 as an e-reader. It helped Amazon to enter the digital book market and compete against Barnes & Noble.
- Fire TV: Fire TV is a streaming media player which was introduced in 2014. It allows users to watch content from various online services like Netflix, Hulu, and Amazon Prime Video.
- AmazonBasics: Introduced in 2009, AmazonBasics is a private-label product line from Amazon. It includes various consumer electronics and household items.
Let’s now look at Amazon’s market value as an investor.
Why Should You Invest in Amazon UK?
Industry analysis tells us that Amazon is now increasingly focusing on AWS as a prime revenue source as the entire world is moving toward cloud computing. Now we will check out whether it is a compelling reason for you to go for Amazon UK investment:
We can see that Amazon has a diversified portfolio with quite a few revenue sources and innovative in-house products. Many of these products and services are now common in our everyday lives. The company has also ventured into new areas, such as healthcare, robotics, and artificial intelligence. So, Amazon will likely find it easy to adapt to dynamic market conditions.
Solid Historical Growth
Investors have reaped good rewards by investing in Amazon early. Investors in the UK have already enjoyed amazing returns from Amazon. If you had invested £1,000 five years ago, your investment would be worth £4,441 today, giving you an annual return of around 34%.
Regarding future prospects, Amazon has immense growth potential. The global e-commerce market is still in its early days and is expected to grow exponentially in the coming years. With its first-mover advantage and continuous innovation, Amazon is well-positioned to capitalise on this growth.
According to CNN Business, 42 out of 53 investment analysts recommended buying Amazon shares, which indicates a positive growth prospect.
Continued Innovation and R&D
Another reason to invest in Amazon is its continued focus on innovation and R&D. The company has been investing heavily in new technologies such as artificial intelligence, robotics, and cloud computing. These are all high-growth areas with immense potential.
AWS is Amazon’s cloud computing platform and is a major driver of its growth. AWS is the market leader in cloud computing and is growing incredibly. In Q1 2022, AWS revenues grew by 37% year-on-year to £17.04 billion. This is a tremendous growth rate and is a clear indication of the immense potential of AWS.
While we can see many positive aspects of buying Amazon shares in the UK, industry analysis and innovation do not guarantee a positive outcome. So, make sure to do your research and use your judgement.
How to Analyse Amazon Share UK’s Outlook?
We will now look at some of the indicators that tell you about Amazon’s financial health and prospects. You will also know if the Amazon share price is overvalued.
- P/E Ratio: The P/E ratio tells you the relationship between a company’s share price and earnings. A P/E ratio of 20 is generally considered to be the average. Amazon currently has a P/E ratio of 63.58, which means stockholders are optimistic about Amazon’s future performance.
- PEG: PEG ratio is the P/E ratio divided by the company’s growth rate. A PEG ratio of 1 is considered to be the average. Amazon’s 12-month forward PEG ratio is 5.74, which is in line with the optimistic outlook we got from the P/E ratio.
- EBITDA: EBITDA is a measure of a company’s operating cash flow. Amazon’s annual EBITDA for 2021 was £51.09 billion, which is a decrease of 22.9% from 2020. The increase in EBITDA reflects Amazon’s solid performance with AWS and great sales volume during the pandemic.
- ESG Score: ESG stands for environmental, social, and governance. Amazon’s ESG risk score, according to Sustainalytics, is around 30, which is slightly higher than competitors such Alphabet Inc (24.1)., Alibaba (26.4), Microsoft (15.2) and Intel (17.3). Amazon’s score is dragged down by its environmental impact and treatment of employees.
Should you go for Amazon CFD?
If you want to invest in Amazon but don’t want to go through the process of buying shares, you can always opt for CFDs. CFD stands for “contract for difference.” It is a type of derivative that allows you to speculate on the price movement of an underlying asset without actually owning the asset.
Investing in Amazon CFDs means that you can go long (buy) if you think the price of Amazon will go up or go short (sell) if you think the price will go down. The main advantage of investing in Amazon CFDs is that you can make a profit from both rising and falling prices.
You can also use leverage to trade Amazon CFDs, which means that you can trade with a larger amount than what you have in your account. However, leverage can also magnify your losses, so it is important to use it wisely.
Step by Step: How to Buy Amazon Shares UK?
Once you decide to invest in Amazon UK, the best way to do it is from an investment platform or investment app. Amazon is listed in several stock markets in the USA, UK, and other major countries. To buy Amazon UK shares, you may either buy them from NASDAQ (AMZN) or London Stock Exchange (0R1O).
Here’s a step-by-step guide on how to do it.
- Choose your platform.
You will find quite a few UK-based and global investment platforms and apps in the UK for your Amazon UK investment. Examples include Fidelity, eToro, HL, Hargreaves Lansdown, and Barclays Smart Investor. They all offer different features, so it is best to check them out and compare them to see which one fits you best.
- Open an account.
Once you find the platform you want to use, sign up for an account. The process is relatively straightforward and should not take more than 10 minutes.
- Deposit money.
The next step is to deposit money into your account. The amount you want to start with is up to you, but most investment platforms have a minimum deposit requirement.
- Search for Amazon UK shares.
Once the money is in your account, it’s time to buy Amazon shares. Look for Amazon in the search bar and select it. Most platforms will also show you a lot of relevant analysis and insights on your dashboard or mobile app’s screen.
- Decide the number of shares and buy.
The next step is to decide how many Amazon shares you want to buy. Remember, you can always buy more later. When you have decided, click “buy.”
And that’s it! You have now bought Amazon shares and are an Amazon shareholder.
How to Invest in Amazon UK?
|Platform||Minimum Deposit||Fees or Spread||Demo Account||Mobile Apps|
|£0||£9.99 per month||Free||Android and iOS|
|£20||1.5 (US Tech 100)||Free||Android and iOS|
|£10||0.75%||Free and unlimited||Android and iOS|
|£100||1%||Free||Android and iOS|
|£0||£2.95 per month||Free and unlimited||Android and iOS|
Founded in 1995, Interactive Investors (II) has its headquarter in London. It is one of the best choices for you to buy Amazon shares in the UK. II offers a flat-fee pricing structure, a convenient option for active and high-volume traders from the UK. The platform has recently won several awards for assuring great service quality.
- Managed fund: You will find various pre-managed investment options with Interactive Investors. The trading charge is minimal for those funds, and you won’t have to pay the fixed monthly.
- Insurance protection: You will get protection for your trading account under the Financial Services Compensation Scheme (FSCS).
- Fund safety: II keeps the investor’s funds separated from their funds to comply with their statutory trust status.
- Deposit fee: £0
- Withdrawal fee: £0
- Inactivity fee: £0
Capital.com or Capital is another top UK-based trading platform where you can trade a variety of asset types including cryptocurrencies, equity stocks, commodities and forex from the US, UK and EU region. The platform is an outstanding choice for buying Amazon shares in the UK as it provides you with full details and an overview of the share and the company.
- Commission-free trading: Capital focuses on generating the best trading experience with a commission-free trading structure. You can frequently trade by paying the spread and overnight fees only.
- Cryptocurrencies: You will find a large list of cryptocurrencies on Capital. So, if you want to test your luck with crypto while trading Amazon shares in the UK, Capital has you covered.
- Great demo account: Capital’s demo account is one of the best in the market, which you can use for learning how to trade.
- Deposit fee: £0
- Withdrawal fee: £0
- Inactivity fee: £0
eToro is one of the most versatile trading platforms that offer commodities, stocks, forex and cryptocurrencies trading. eToro is also one of the best options if you are wondering how to buy Amazon shares in the UK.
The platform does not charge any commission on trading, which is an excellent convenience for frequent traders. eToro is also an excellent platform for beginners because of its copy-trading and social trading features.
- Rich community and resources: eToro has successfully built a highly engaging and informative community of users and trading enthusiasts. You can get a lot of industry and company analytics and insights from the eToro community.
- Social trading: eToro lets you imitate someone else’s trading behaviour and strategy for a minimum fee through the copy trading feature.
- Security and reliability: eToro complies with all regulatory requirements and industry good practices due to its worldwide presence. You will also get the most secured transaction and trading practices.
- Deposit fee: £0
- Withdrawal fee: £5
- Inactivity fee: £10 per month after a year of inactivity
Plus500 is a global financial and trading firm with its headquarter in London. You will get excellent features related to CFD and share trading. Plus500 supports many payment methods for you to make your funds available globally.
The platform boasts over 22 million registered traders across more than 50 countries. You can trade for over 2800 instruments and Amazon shares in the UK. Plus500 is an excellent choice for seasoned investors and CFD enthusiasts.
- Leveraged trading: Plus500 supports active trading with up to 1:300 leveraged trading so that you can quickly seize opportunities from the market movement.
- Solid reputation: The platform complies with various global and local regulatory requirements. It is listed as an FTSE 250 company on the London Stock Exchange, which tells you about the excellent reliability of the platform.
- Multiple trading options: Plus500 lets you purchase Amazon or other US stocks directly or purchase them as a CFD to gain from price differences. You will also get access to multiple advanced risk management and forecasting tools
- Deposit fee: Currency conversion fees for Amazon US Stocks
- Withdrawal fee: £0
- Inactivity fee: £10 after three months of inactivity
FinecoBank is one of the most advanced investments and trading platforms of the UK where you can trade in the stock exchanges of several countries. The platform lets you trade in ISA accounts, CFD, trading, and forex. You can also future trade on commodity pricing using your FinecoBank CFD account.
FinecoBank is a good choice for buying Amazon UK shares because of its versatile operations and resourceful interface. It is one of the few UK platforms where you can trade the Volatility Index (VIX) and other advanced trading options.
- Saving on conversion fees: FinecoBank lets you save on the forex conversion fees. Once you convert your GBP account balance to USD, you can buy any amount of stock with that USD balance without incurring any more conversion fees.
- Top indexes shortlisted: FinecoBank dashboard makes it super easy for professionals to start trading once they register on the platform. You can quickly see top-performing global stock market indexes along with visual insights.
- After-hours trading: You can trade in NASDAQ within the after-hours with a spread of as little as 0.06%.
- Deposit fee: £0
- Withdrawal fee: £0
- Inactivity fee: £0
Can I buy Amazon shares in the UK?
Yes, you can buy Amazon shares UK, preferably from a stockbroker, investment platform, or investment app authorised and regulated by the Financial Conduct Authority (FCA).
How much does Amazon share cost?
The stockbroker’s dealing charges will determine the cost of an Amazon share and the current Amazon shares price. Other factors that affect share price include earnings, revenue, growth prospects, and general market conditions. You can check the current Amazon share price on Google Finance, CNBC, Yahoo Finance, and other financial websites.
What are the ways to invest in Amazon UK?
The two main ways to invest in Amazon UK are buying shares outright or buying an Amazon tracker fund. In addition, you may also invest in Amazon shares as a CFD to benefit from price changes in any direction.
Should I invest in Amazon UK?
Amazon has been performing well in recent years, evident from its stock pricing trend over the past ten years. The company has also invested heavily in revenue diversification and technological research. Your investment decisions should depend on your investment goals and risk appetite.
Is there any risk with Amazon UK investment?
The risks involved in Amazon UK investment are primarily market risk and business risk. Market risk is the risk that the overall stock market may fall, affecting the price of Amazon shares. In contrast, the business risk is that Amazon’s business may not perform well, which would affect the company’s share price.