After being pummeled by a financial perfect storm, Amazon has roared back into the spotlight over the past year. The stock has seen remarkable gains, soaring a whopping 84% – more than triple the 27% uptick experienced by the S&P 500. In light of the tumultuous economic climate and the surge of artificial intelligence, the burning question emerges: is it too late for investors to join the Amazon bandwagon, or is it a golden opportunity waiting to be seized?
Image source: Amazon.
The Stormy Setback
Amazon was greatly affected by the market downturn of 2022 that morphed into a double-edged blade. Lingering inflation directly hit consumer spending, causing a cascading effect on businesses, leading to a crucial dent in Amazon’s vital e-commerce, cloud computing, and digital advertising domains. Nevertheless, as the economy gradually rebounds, Amazon’s key business segments show promising signs of revival. The company recently disclosed its full-year 2023 results, unveiling a 12% surge in net sales, totaling $575 billion, and a recovery from a loss of $0.27 per share to earnings of $2.90 per share.
Amidst this recovery phase, Amazon’s digital sales hiked up by 3%, with AWS (Amazon Web Services) and digital advertising scaling upwards by 13% and 24% respectively, amplified by a record-breaking holiday quarter. The company’s business triumph during the ongoing recovery paves the way for robust growth prospects ahead.
Favorable Tailwinds
Amazon’s three major business segments, digital retail, traditional advertising, and cloud computing, are on the brink of promising growth. The digital retail sector is projected to hit $6.3 trillion in 2024, while traditional advertising is expected to bounce back with a 2.4% surge. Simultaneously, digital advertising is predicted to jump by 13.2%. Cloud infrastructure services, primarily AWS, are projected to witness a staggering 26.6% user spending growth. These statistics position Amazon to harness the benefits of these ongoing upward trends.
However, the most significant potential growth driver is generative AI, a sector tailing at an estimated $1.3 trillion, set to be a game-changer. With its strategic focus on cloud computing, Amazon is positioned to reap the immense rewards generated by the evolving landscape of generative AI.
Amazon’s Attractiveness as an Investment
Trading at approximately 2 times forward sales, Amazon appears to be a bargain considering its bright prospects. As a dominant leader in e-commerce and cloud computing, and a solid player in digital advertising, the stock’s modest valuation makes it an enticing investment prospect at its current standing.
Given these circumstances, the all-important question arises: Is now the opportune moment to delve into Amazon shares?
Before you buy stock in Amazon, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Amazon wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than tripled the return of S&P 500 since 2002*.
See the 10 stocks
*Stock Advisor returns as of February 20, 2024
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Danny Vena has positions in Amazon and Nvidia. The Motley Fool has positions in and recommends Amazon and Nvidia. The Motley Fool recommends Gartner. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
