Source: PaxForex Premium Analytics Portal, Fundamental Insight
Amazon has undergone a remarkable transformation since its humble beginnings as an online bookseller in 1994. Since becoming a publicly traded company just three years later, its stock has skyrocketed by over 130,000%. Today, Amazon's business encompasses a vast array of products, a comprehensive range of digital services, grocery operations, space satellites, and cloud computing. With dominant market shares in e-commerce and the cloud industry, it seems that the prime opportunity to invest in Amazon may have been in the distant past.
Nevertheless, despite its impressive growth, e-commerce sales accounted for only 15% of total retail sales last year, suggesting that the market has yet to reach its full potential. Additionally, the current surge in demand for artificial intelligence (AI) is expected to further drive revenue in the cloud sector, as businesses increasingly rely on AI services. With a solid foothold in both these markets, Amazon possesses a robust long-term outlook.
Therefore, it is still an opportune time to consider investing in Amazon stock.
The introduction of OpenAI's ChatGPT in November of last year astonished the technology industry with its ability to generate human-like conversations. This platform pushed the boundaries of what was previously believed to be achievable with AI, prompting numerous companies to refocus their efforts on developing this field.
Cloud computing has emerged as one of the primary beneficiaries of the AI revolution, as businesses scramble to leverage this technology to enhance their offerings. While Amazon appeared to lag behind in this area, its cloud competitor Microsoft secured exclusive licenses to utilize several of OpenAI's AI models. However, Amazon is now making significant strides in the realm of generative AI.
For years, the e-commerce giant has utilized AI in its retail operations to track consumer shopping patterns, provide personalized product recommendations, and optimize shipping logistics. Leveraging its expertise in this technology, Amazon has developed an AI model called Amazon Bedrock, which excels at advanced generative AI tasks such as creating comprehensive social media campaigns based on a company's product descriptions.
In April, the company announced that it would make Amazon Bedrock accessible to users of Amazon Web Services (AWS), along with a tool called Code Whisperer. This innovative service empowers developers to input their desired outcomes and receive tailored code solutions to meet their specific needs.
Although Amazon initially lagged behind in AI services, its dominant market share in the cloud industry positions it advantageously. By impressing AWS users with its current AI models, the company is poised to maintain its leadership position and reap substantial profits from the rapidly expanding AI market.
Amazon faced significant challenges last year, as the prevailing macroeconomic conditions resulted in reduced consumer spending and substantial operating losses of $10.6 billion in its e-commerce segments during fiscal year 2022. Furthermore, inflationary pressures compelled businesses to cut back on cloud budgets, leading to AWS experiencing a slowdown in growth in recent quarters. Given these circumstances, it becomes crucial to adopt a long-term perspective when evaluating Amazon's prospects, considering its commanding position in two pivotal markets is likely to yield favorable results over time.
Encouragingly, the first quarter of 2023 indicates that Amazon's e-commerce business is on a path to recovery. During this period, the company's North American segment returned to profitability, reporting $898 million in operating income. Additionally, the international segment showed a slight improvement. As inflationary pressures gradually subside and Amazon benefits from recent budget adjustments, it is anticipated that the company will continue to demonstrate enhanced performance in its e-commerce operations. With its steadfast dominance in the market, Amazon is positioned to deliver consistent long-term growth.
Regrettably, AWS experienced further deceleration in earnings growth during Q1 2023. However, Amazon is still in the nascent stages of its foray into AI cloud services. The extensive retail knowledge accumulated by the company could serve as a significant advantage in developing efficient AI models for AWS, while its leading market share in the sector continues to attract new users.
Despite a 54% year-to-date increase, Amazon's stock remains 44% below its peak of $186 in July 2021. This suggests that there is still potential for a bullish trend to emerge. With its strong positions in two expanding markets and ample room for growth, it is not too late to capitalize on Amazon's long-term prospects and potential profitability.
As long as the price is above 123.00, follow the recommendations below:
- Time frame: D1
- Recommendation: long position
- Entry point: 129.48
- Take Profit 1: 135.00
- Take Profit 2: 140.00
Alternative scenario:
If the level of 123.00 is broken-down, follow the recommendations below:
- Time frame: D1
- Recommendation: short position
- Entry point: 123.00
- Take Profit 1: 118.00
- Take Profit 2: 113.00
