Amazon’s Strong Growth and Competitive Edge Drives Investment Potential
Amazon (NASDAQ: AMZN) holds a market cap of $2.2 trillion, making it one of the world’s most valuable companies. Over the past decade, its shares increased by 853%, rising 11,290% in the last 20 years (as of May 28). Despite this impressive performance, Amazon is currently trading 15% below its all-time high.
Investors should consider these three key factors about Amazon:
Image source: Amazon.
1. Continued Revenue Growth
Amazon’s revenue rose by 36% from 2021 to 2024, and analysts expect a 31% increase from 2024 to 2027, despite generating $638 billion in sales last year. The company is well-positioned to benefit from trends in online shopping, e-commerce, cloud computing via Amazon Web Services (AWS), digital advertising, and artificial intelligence (AI).
2. Multiple Competitive Advantages
Amazon offers several competitive advantages, including a strong network effect in its marketplace. Increased shopping activity attracts more sellers and buyers, bolstered by its Prime membership. Additionally, a robust logistics network and purchasing power over suppliers contribute to its cost advantages.
The switching costs for AWS also serve as a competitive advantage. Businesses relying on AWS as an IT partner are unlikely to switch providers, especially with rising AI adoption.
3. Untapped Earnings Potential
Historically, Amazon has prioritized revenue growth. However, CEO Andy Jassy is now focusing on improving profitability by enhancing operational efficiencies. Operating income is projected to rise from $24.9 billion in 2021 to $68.6 billion in 2024. Despite rising profitability, sustainable long-term success will depend on Amazon’s ability to invest in intrinsic growth opportunities.
Should You Invest $1,000 in Amazon Now?
Before investing in Amazon, consider that it was not included in the Motley Fool’s recent list of the ten best stocks to buy. Historical recommendations include Netflix, which returned $651,049 for a $1,000 investment, and Nvidia, with returns exceeding $828,224.
Amazon remains a strong investment candidate, though investors should compare it against other opportunities identified by analysts.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
