I’d buy Amazon shares for my Stocks and Shares ISA

One of the great things about a Stocks and Shares ISA is that investors can hold any assets inside these wrappers as long as they trade on what’s known as a recognised stock exchange.

These are exchanges recognised by the government, which essentially means any developed market stock exchange. This includes the NASDAQ, which is why I’d buy Amazon (NASDAQ: AMZN) shares for my ISA. 

Stocks and Shares ISA buy

Amazon has become a household name over the past decade. The company’s relentless focus on improving its performance has allowed it to grab market share from slower-moving competitors. 

Amazon has spent tens of billions of dollars investing in the infrastructure required to allow consumers to order something from their sofa and have it delivered to their front door 12 hours later. The company’s variety of products and speed of service is virtually unrivalled. What’s more, many competitors can’t even promise the same delivery timescale. 

However, one of the unbelievable things about this business is that Amazon retail, the product the corporation has become best known for, isn’t that profitable. The company’s retail profit margin is around 1%, although this lack of profitability hasn’t held back Amazon shares over the past decade. 

Where the business makes its money is its cloud computing and advertising divisions. The Amazon Web Services (AWS) businesses have much fatter profit margins and produce the bulk of the group’s operating income. 

These businesses are growing rapidly as the company is reinvesting all of its profits. That said, the organisation is facing fierce competition from Microsoft and Google, which are also investing heavily in cloud computing and web services.

I think this competition will weigh on profit margins across the sector over the long run. The cost of cloud storage has dropped significantly over the past few decades. Better technology and more competitors in the market have helped push down prices. The company itself has been a significant contributor to the cloud ‘arms race’. It has spent huge sums building its cloud computing business and enticing customers with low prices. Peers have responded by lowering their own prices. This competition is probably the most considerable risk facing Amazon shares. 

Another challenge the group may face is competition concerns from regulators who believe the business has too much power in the retail market. This could lead to a forced break up. 

The outlook for Amazon shares

Despite these challenges, I’m incredibly excited about the company’s long-term potential. Amazon has always been focused on growth over anything else. To that end, the corporation invests billions every year on research and development to improve its products. And I think as long as the business maintains this trajectory, the group will hold the edge over competitors. This should lead to top- and bottom-line growth. 

That’s why I’d buy the company for my Stocks and Shares ISA today. As a long-term growth investment, Amazon shares seem to have all the right qualities.