Started as an online bookshop in a garage in suburban Seattle, Amazon has grown to become one of the most valuable brands in the world. Over the years, the company has remained committed to technological innovation and aggressive reinvestment of profits into growth. Today, it holds a diverse array of subsidiaries spanning across a multitude of categories.
Amazon's market capitalisation of over $1 trillion safely positions it as the largest firm by revenue and market share. Many consider AMZN stock to be a reliable choice due to its strong company fundamentals and promising outlook.
For UK-based investors, Amazon is particularly appealing due to its global reach and consistent growth trajectory. In this article, we explain how exactly UK investors can take a slice of the pie.
Step 1: Choose a Trading Platform: If you are unsure, check our list of the best trading platforms in the UK.
Step 2: Open an Account: You will need your ID along with personal and contact details.
Step 3: Fill Out the W-8BEN Form: Non-US resident traders need to complete the W-8BEN form to buy US-listed stocks.
Step 4: Fund Your Account: Many trading platforms require you to deposit a certain amount (ranging from £1 to £500) to start trading.
Step 5: Research Thoroughly: You can find the latest news on Amazon’s stock movements through your preferred platform.
Step 6: Buy the Share: If you are happy with the stock valuation and think it’s the right time, place the order.
Best Place to Buy Amazon Shares
A Guide to Buying Amazon Shares in the UK
Choose a Trading Platform
When choosing platforms, make sure to check that they provide exposure to Amazon shares because the company is not listed on the London Stock Exchange.
Also, be mindful of trading costs, currency conversion fees, and minimum deposit requirements. Many platforms today waived their trading commissions and have very small deposit requirements – but the currency conversion fees can be quite high.
Open a Brokerage Account
To open a brokerage account and buy Amazon shares, you need to share your ID, personal information, and contact details.
Since Amazon is listed on US security exchanges, you will have to swap your pounds for dollars, so make sure that you know how much you will pay in currency exchange before you opt-in as it can lower your order value significantly.
Since Amazon is a US-based company, you don’t have to pay Stamp Duty when buying its share, but Capital Gains Tax is still applicable if your profits exceed £12,000 in a year. Consider a stocks and shares ISA account for better tax benefits – the yearly allowance for ISAs is higher than CGT (£20,000).
Fill Out the W-8BEN Form
The process of buying US stocks is more or less the same as buying UK shares. But, provided that you are not a US citizen or taxpayer, you need to fill out the W-8BEN form.
Your share dealing platform usually provides the W-8BEN form, and you can fill it out electronically. The majority of platforms also include a step-by-step guide on how to complete and send it.
The Internal Revenue Service (IRS) of the United States requires this document to confirm that the investor is not a resident of the US. Those with valid W-8BEN forms are exempt from 30% tax on income they made from their investments.
Deposit Funds
Many UK trading platforms offer a variety of depositing options, including bank transfers, card payments, Apple Pay or Google Pay, and PayPal – you name it. Make sure to check the additional charges when choosing a deposit method. Card payments, for example, are instantaneous but may come with extra processing fees.
Also, never invest more than you can afford to lose.
Amazon has a consistent track record of profitability and has very strong financial health. Nevertheless, investments carry inherent risks – prices can go up and down, and you may lose your initial investment altogether. So a rule of thumb is never to invest the money you need to sustain your day-to-day life or more than you can afford to lose.
Do Your Own Research
You should be diligent when timing your trades. When buying shares of a company as gigantic as Amazon, it’s quite easy to do so. Being one of the world’s largest retailers, its stock performance is often a solid indicator of the performance of the industry and market as a whole. It also means that brokers and analysts simply can’t stop talking about it.
A good starting point is the company’s investor relations page. It includes press releases, upcoming announcements, and annual reports. As we’ll discuss more in detail below, these announcements have a direct impact on the price of the share.
It’s also wise to monitor key metrics such as price-to-earnings ratio, trading volume, and 12-month share price forecast. Keeping an eye on the factors that affect the share price will give you an idea of when is the best time to buy Amazon shares – if the indicators point to a decline in price, you may end up shopping during a sale.
While doing your research, you should also consider your investment goals, including the length of your prospective investments. A good rule of thumb is to hold on to your investments for five years, as it will give it time to smooth out the returns from any downturn in stock markets.
Place Your Trade
And, voila! Once you have set up your account, filled out the W-8BEN form, deposited funds, and completed some research, you are ready to buy your very first Amazon share.
Amazon Shares Under the Microscope
Net sales were up by 9% at $514 billion.
Operating income in Q4 2022 was $2.7 billion, down from $3.5 billion in Q4 2021.
Net income in Q4 2022 was $0.3 billion, down from $14.3. billion in Q4 2021.
Following a pleasant bull run in 2021 fueled by the uptick in e-commerce spending throughout the pandemic, Amazon had a near-disastrous experience in 2022. The stock price slashed by nearly half as markets shrunk amid the growing fears of a global recession.
The rising inflation, war in Ukraine, and aggressive budget tightening across investors resulted in AMZN price drop from $167 at the start of 2022 all the way down to $84 at the end of the year.
In late April 2022, the price fell by 14% on the day company released its financial results for Q1 of 2022. The company reported $3.8 billion in net loss.
Amazon’s revenue primarily comes from its operations across North America – so, the condition of the US economy is highly relevant in understanding how the company performs financially.
The US Federal Reserve (Fed) brought interest rates up to 4.5% in 2022. This, coupled with continuing international conflicts and disruptions in supply chains, soured investor sentiment. Following the announcement of interest rates, the price of the Amazon share dropped from about $90 threshold, only to recover in early January 2023.
What’s Ahead for Amazon?
Amazon had somewhat a stronger entry to 2023. Following an announcement of widespread redundancies, the stock price rose upwards of $100. The analyst forecasts for 2023 can give us a further idea of what will follow after.
Remember, price forecasts are just calculated guesses, a conjecture – whatever you call them. They don't guarantee anything.
The consensus analyst forecast for Amazon stock price is strongly bullish – 37 out of 38 rates the stock as a buy, while one gives it a hold rating. For 2023, the price target stands at $136.86 while the highest stock forecast is $192, and the lowest is $106.
Amazon Stock Splits
A company increases the number of shares available by splitting its stocks. While the number of outstanding shares increases and the individual share value drops, the overall market capitalisation and the value of each shareholder’s stake remain the same.
If you hold a company share when a stock split occurs, you will be given shares with equivalent value to your previously held shares. So, if the company opts for a 2-for-1 split, it will give you an additional share. After the split, your two shares would be worth the same as the one share you had before.
A stock split usually means that the company is on the right track. It shows that the company is confident about its position, and seeks additional investments by lowering the cost of it.
It’s also good news for investors like you that there will be more shares circulating at a much lower price. Amazon’s latest split, for example, has made the stock much more accessible for the everyday retail trader.
Amazon split its stocks a total of four times in its history:
Date | Split Ratio | Starting Price | Result Price |
|---|---|---|---|
2 June 1998 | 2:1 | $85.68 | $42.84 |
5 January 1999 | 3:1 | $354.96 | $118.32 |
2 September 1999 | 2:1 | $199.06 | $99.53 |
5 June 2022 | 20:1 | $2,447 | $122 |
Does Amazon Pay Dividends?
No, Amazon doesn’t pay dividends.
Some companies may share their profits with the shareholders in the form of dividends, while others choose to reinvest in the business to improve and expand their operations. Neither approach is right nor wrong – it’s really a matter of strategy.
Amazon’s business model has long revolved around branching out into exploring different corners of the market. Over the years, we’ve seen expansions into grocery and pharmacy markets, and a very successful venture into streaming services and film production. These all point to the fact that Amazon simply chooses to use the profits to grow its business.
Alternative Ways of Investing in Amazon
Amazon’s share ranged between $170 and $81 within the last year – which can be quite steep for many folks. There are various other (and cheaper) ways to invest in the retail giant:
Investing in funds
Fractional shares
Speculating on price movement through CFDs or spread betting
1. Investing in Amazon Through Funds
Instead of directly owning an Amazon share, you can invest in a fund that includes Amazon shares.
Funds are baskets of investments that pool together a variety of assets like shares. When you invest in a fund, you don’t actually own the underlying assets – the fund owns the assets, and you own a share in the fund instead. The price of your share rises and falls depending on the performance of the underlying assets the funds hold.
Numerous funds include Amazon shares. The company is regularly included in funds tracking tech companies, consumer discretionary select sector funds, or index funds that track the largest companies by market capitalisation. With a market cap of more than $1 trillion, Amazon is a fixture of index funds as such.
Investing in a fund is usually more budget-friendly than buying individual shares. You can also get instant diversification by spreading out your investments across multiple assets – meaning that if the Amazon stock does badly, it can be offset with other shares included within the fund.
It’s also a better choice to generate income. Amazon doesn’t pay dividends, but other companies within a fund might. This means that you can both be invested in Amazon and drive income from your investment.
Funds that Include Amazon Shares: Our Top Picks
Fidelity MSCI Consumer Discretionary Index ETF (FDIS)
Amazon Weighting: 19.78%
Tracks: The performance of the MSCI US IMI Consumer Discretionary Index
Expense Ratio: 0.08%
VOO Vanguard S&P 500
Amazon Weighting: 2.31%
Tracks: The performance of the 500 largest companies in the US by market cap
Expense Ratio: 0.03%
iShares Expanded Tech Sector ETF
Amazon Weighting: 7.96%
Tracks: The performance of North American companies in the technology, communication services, and consumer discretionary sectors.
Expense Ratio: 0.40%
Get Started With Funds
2. Fractional Shares
As the name suggests, a fractional share represents a unit of a whole share. It can be a split of 1/10, 1/100, or even 1/1000 of a share, or it can be based on the dollar amount. With Freetrade, for example, fractional shares cost between £1 to £2.
Interactive Brokers was the first commercial trading platform that introduced fractional shares back in 2019, and many followed this suit. Today, you can buy fractional shares with cheaper trading platforms, including Freetrade, Trading 212, and eToro.
Get Started With Fractional Shares
3. Trading Derivatives
Derivative products like contracts for difference (CFDs) and spread betting allow you to take advantage of the price movement of a share without actually owning it. They are called derivatives as they drive their value from an underlying asset. Here’s how it works:
If the Amazon share stands at $98, and you believe it will go up in price, you can place an order. If the price rises to $108 and you decide to close your position, you can pocket the $10 difference.
You can also speculate in the other direction. Let’s suppose you believe the price will fall, you can go “short”. Say that the price fell to $88, you get $10 in profits when you close your position.
However, it’s a two-way street: if you are wrong and the price doesn’t move in your predicted direction, you will have to pay the difference.
The reason derivatives are more cost-effective is that you can use leverage with them. Leverage refers to the borrowed money from your broker, and it increases your buying power.
Say that you have £20 to invest, and your broker gives you 5x leverage (which is the amount many UK CFD brokers allow for stocks), you can increase your order value to $100.
It’s crucial to note that while leverage magnifies your earnings, it also magnifies your losses. Trading derivatives is a highly risky venture due to the use of leverage – between 70% and 80% of retail accounts lose money when trading CFDs or spread betting.
Derivative products have very complex mechanisms, so make sure that you understand them thoroughly before trading.
Get Started With Spread Betting & CFDs
Plus500 Risk Warning: 81% of retail CFD accounts lose money
So, What’s the Best Way to Invest in Amazon?
This entirely boils down to your risk tolerance, financial means, and investment goals.
If you have the money to buy an Amazon share directly at the current market price, it can work well with a buy-and-hold strategy. Meanwhile, if you are after making quick turnarounds, CFDs and spread betting offer you a good opportunity to take advantage of the price movements with magnified order value – when done sensibly. This way, you don’t have to wait for the share to appreciate in value to yield decent returns.
Funds, on the other hand, give you an opportunity to avoid high costs and diversify your portfolio with a range of investments. Non-dividend-yielding Amazon shares are usually pushed off the radar of income investors – by investing in a fund that includes dividend-paying stocks, you can eat your cake and have it too.
Is Amazon a Long-Term Buy?
As inflation continues to drive up the cost of living, consumers may start to cut back on retail purchases and subscription services, which make up a significant portion of Amazon's revenue. Yet, the company's cloud computing service, AWS, remains a global leader with a staggering 34% market share.
Despite facing significant challenges towards the end of 2022 and continuing into 2023, analysts remain optimistic about Amazon's long-term prospects. While the company's stock value has dropped by 50% in recent months, if you are a long-term investor, this could present an attractive opportunity to buy in at a lower price. There may be more bumps in the road ahead, but Amazon's strong fundamentals and proven track record of innovation suggest that the company is well-positioned to weather the storms.
