In many ways, Amazon.com (NASDAQ: AMZN) seems recession-proof. The company’s e-commerce operation has a reputation for offering low prices, and its Prime membership program offers significant value for just $99 a year, providing members with free two-day shipping on millions of items as well as video streaming and a slew of other benefits.
Since its inception, Amazon has staked its reputation on value, using efficiencies and the flywheel effect to drive it, and customers have bought into the proposition. Its cloud-computing division, Amazon Web Services, is also likely to weather a recession as companies need data storage and other cloud services regardless of the economic climate.
Amazon’d business fared well during the recent financial crisis, as revenue grew by 29.2% in 2008 and 28.4% in 2009. While those numbers were slower than the company’s revenue growth in the years before and after, they still represent an exceptional growth rate at a time when many retailers were losing sales and overall retail sales were falling.
Earnings per share growth was also solid back then, increasing 33% in 2008 and then 37% in 2009. Back then, Amazon’s profit margins were better than they are today as the company had yet to make massive investments in fulfillment centers, AWS, and other infrastructure that it has since. In 2009, it had profit margin of 3.7%, much better than the may of its competitors.
But what about Amazon’s stock during a recession-fueled market downturn? How might it do?
Don’t get too excited
While Amazon has proven that it can thrive even during a recession, the stock’s performance has not always followed suit. Amazon shares lost nearly two-thirds of their value from their peak early in 2008 at $97.43 to their bottom at $34.68 in November 2008, a drop of 64.4%….