Tech stocks have had a rough run lately -- or, at least, things haven't looked as good as we've grown used to over the course of this long bull market. The past couple of weeks have been a rough one for tech stocks, and Amazon (AMZN -1.44%) hasn't escaped unscathed: Since closing at $2,039.51 on Sept. 4, Amazon's stock has hit a low of $1,596 and has not yet fully recovered. That has some wondering if Amazon will rebound at all, at least anytime soon. Analysts are beginning to fret over a potential economic downturn, and tech stocks, with their higher betas, look risky in a bear market. So is it time to cut and run from Amazon?
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Amazon isn't going anywhere
When markets go down, many stock prices go with them. But for investors with a view toward long-term profits, the real question isn't what Amazon's stock price is likely to be next month -- it's what the stock will look like in a few years. Over the long run, what matters is whether Amazon will continue to survive through bear markets and emerge on the other side ready to grow with the recovering economy. And nobody should fear that Amazon can't do those things.
Amazon holds key competitive advantages over its competitors. It is an immensely wealthy company. And it thrives in spaces like e-commerce and video streaming -- spaces that are going to be even more important in the future, not less so.
Amazon's unbeatable competitive edge
Amazon's power is in its integrated services. It competes against companies that are smaller and offer less comprehensive products and services.
Take Amazon's position in the streaming market, for instance. By most measures, Amazon's Prime Video service reaches far fewer people than Netflix's (NFLX -4.26%) subscription service. Yet Amazon Prime Video's subscriber figures appear to be within striking distance of Netflix's because Prime Video is part of the broader Amazon Prime service, which integrates multiple services and perks into one subscription. The streaming service doesn't reach every Prime subscriber -- not all Prime subscribers actually use it -- but all of them could access it if they wanted to, and that's a powerful advantage that helps Amazon compete with the top dogs in streaming.
The integrated nature of Amazon's streaming offerings may also come in handy if and when the economy starts looking worse on a long-term basis: as consumers look to cut costs during a recession, they seem likely to think twice about cutting Prime -- which also offers cost-effective perks like two-day shipping on many Amazon purchases -- in a way that they would not think twice about cutting Hulu, HBO, or Netflix.
Amazon's streaming-and-retail integration works in reverse, too. Walmart (WMT 1.31%) is a powerful retail rival for Amazon, but Walmart's streaming efforts are comparatively weak. Walmart has a streaming marketplace for rentals and digital copy purchases (Vudu) and a business relationship with streaming platform company Roku (ROKU -4.59%) that includes retail exclusives, but Amazon has a more established Vudu-like marketplace integrated into its e-commerce site, plus a subscription service (Amazon Prime Video, part of Amazon Prime) and its own streaming platform and hardware (Fire TV). Amazon can push its retail options, particularly digital purchases, on its streaming platforms and devices.
Amazon is massive and has a broad reach across different business spaces. Just as importantly, Amazon has become masterful at leveraging and combining its different businesses into integrated offerings to consumers.
Amazon isn't your typical tech company
Amazon isn't going anywhere. It will survive any bear market and come out of it with deep pockets and in a great position to lead a recovery. But that's not the only reason to believe in Amazon right now. Amazon may be a tech company, but it's not a typical tech stock.
Amazon is a retailer, and it's a budget retailer to boot. It offers lower prices, and it has recently made big inroads into the market for essentials in the form of its Prime Pantry offerings and acquisition of Whole Foods Market.
Lots of tech stocks deal primarily in luxuries: newer, fancier computers, entertainment streaming services, and video games. But Amazon has hedged its bets by becoming a low-cost provider of many goods, including relatively inelastic ones. That will help it limit losses even in a slower economy.
Amazon is a dream for buy-and-hold investors
Extremely aggressive investors may spend the next few weeks and months trying to guess just what Amazon's stock will do in the short term. But long-term investors should simply hold on to the tech giant's stocks -- and, if the price drops, perhaps buy even more. Any sensible buy-and-hold strategy should still consider Amazon a great investment. In buy-and-hold, giant companies that are sure to survive bear markets and lead recoveries are always good buys, and Amazon fits the mold as well as any company in existence today.
