Shares of technology giants Amazon (AMZN) and Meta Platforms (META) gained 80.9% and 194.1%, respectively, in 2023. This significant growth was attributed to the resilient economy, coupled with their strategic investments in artificial intelligence (AI) and efforts to streamline costs – all of which contributed to driving up their stock prices.
The positive momentum in their businesses has continued into 2024, as evidenced by the sustained upward trend in their share prices. Meta Platforms has gained 33.4% year-to-date, while Amazon’s stock appreciated by 11.5% during the same period.
Given this background, let’s delve into various factors to gain insights into what the future holds for Amazon and Meta stocks in 2024, and determine whether they can stage a repeat of the remarkable gains they delivered in 2023.
The Outlook for Amazon Stock in 2024
Internet commerce and cloud computing giant Amazon delivered revenue of $574.8 billion in 2023, up 12% year-over-year. Its operating income tripled year-over-year to $36.9 billion. Further, its free cash flow improved to an inflow of $36.8 billion for the trailing twelve months, compared with an outflow of $11.6 billion in the prior year.
Amazon successfully reduced the cost-to-serve of its stores, enhanced delivery speed, and expanded its retail offerings by introducing tens of millions of new items to its platform. Furthermore, it experienced growth in the advertising and cloud business (AWS). The company’s operating margin saw substantial improvement, attributed to its transition from a single national fulfillment network to a regionalized model, which reduced delivery distances and associated costs.
These positive developments significantly bolstered Amazon’s share price. Looking ahead to 2024, Amazon CEO Andrew Jassy affirmed the company’s commitment to further lower its cost and focus on faster delivery, which will likely significantly boost its retail sales and margins.
Besides retail sales, Amazon’s advertising revenue continues to grow rapidly, emerging as a key growth catalyst. Its advertising services revenue jumped over 24% in 2023, benefitting from sponsored ads. Moreover, it is growing at nearly twice the rate of its AWS business, which is impressive. To capitalize on increasing demand, Amazon has expanded its offerings to include sponsored TV and is further enhancing its services by integrating machine learning technologies.
Amazon’s AWS business registered about 13% growth in 2023 and could cross $100 billion in annualized revenue in 2024. Acceleration in large deals, a strong customer pipeline, integration of AI in its offerings, and ongoing cloud migration will likely support the segment’s growth.
Overall, Amazon is well-positioned to deliver stellar growth in 2024 and benefit from its AI-led initiatives, which will likely support the uptrend in its share price and enable it to deliver above-average returns. This is also reflected in analysts’ optimistic outlook on AMZN. Out of the 45 analysts covering Amazon, 41 have a “Strong Buy” recommendation, three analysts recommend a “Moderate Buy,” and one has a “Hold.”
However, as AMZN stock has already appreciated significantly in value, its growth this year may not compare to that of 2023. Even with a Street-high price target of $230, suggesting a potential upside of nearly 36%, Amazon might not replicate its 2023 performance. The stock’s average price target is $202.25, which implies about 19.3% growth potential from current levels.
Forecasting the Trajectory of Meta Platforms Stock
Meta Platforms is benefiting from its dominance in the social media space, its aggressive investments in AI, and AI’s integration into its offerings. The company has managed to significantly improve engagement on its platforms, and is effectively monetizing that activity.
Notably, Meta CEO Mark Zuckerberg said during the Q4 conference call that over 3.1 billion people use at least one of the company’s apps, including Facebook, Instagram, and WhatsApp, daily. While the company managed to drive engagement, 2023 was also a so-called “year of efficiency.”
That meant Meta undertook significant workforce reductions while concentrating on operational streamlining, resulting in a remarkable 69% year-over-year increase in net income for 2023, alongside the initiation of dividend payments. The company also unveiled innovative products like Threads.
