Source: PaxForex Premium Analytics Portal, Fundamental Insight
Amazon's stock has been soaring in 2023, boasting a remarkable 56% increase, outperforming the Nasdaq Composite's gain of 33%. This impressive performance has caught the attention of investors, leading many to consider this prominent tech giant as a potential investment option.
Despite currently being 30% below its all-time high, there are three compelling reasons why Amazon remains an enticing investment opportunity. Firstly, with a market capitalization surpassing $1.3 trillion and a revenue of $514 billion in 2022, Amazon has established itself as a dominant force in the global business landscape. Its success can be attributed to its ability to offer highly sought-after products and services, leading to extensive daily interactions with consumers and businesses alike.
As an individual, many find myself frequently engaging with Amazon's services, benefiting from my Prime membership with free next-day shipping and access to Prime Video, which boasts over 200 million global subscribers. Furthermore, Amazon's acquisition of Whole Foods in 2017 has enhanced its market presence, while its hardware products, including the Kindle e-reader, Fire TV, and Echo smart speaker, contribute to its diverse revenue streams.
On the enterprise side, Amazon Web Services (AWS), the leading cloud-computing platform with a one-third market share, serves as a vital service for businesses of all sizes. In 2022, AWS generated impressive revenue and operating income of $80 billion and $23 billion, respectively, marking substantial double-digit growth compared to the previous year.
The fact that Amazon has become an integral part of its user base's lives is a highly attractive trait from an investment perspective. This widespread adoption not only positions the company as a formidable competitor in various sectors but also strengthens its prospects of maintaining market leadership in the years to come.
Considering Amazon's massive revenue base, one might question if significant growth opportunities remain for the company in the next decade. Concerns arise that the law of large numbers could come into play, potentially limiting further expansion as existing opportunities are fully tapped and new markets become scarce. This apprehension may be shared by many investors.
However, even with its substantial size, Amazon still possesses a considerable runway for expansion. According to the St. Louis Federal Reserve, e-commerce accounted for just 15.1% of overall retail sales in the US during the first quarter of 2023. This figure has grown over the past two decades, mainly due to internet and smartphone proliferation. While it's uncertain how high this percentage can go, the trend acts as a powerful tailwind for Amazon's e-commerce operations.
Additionally, the global cloud-computing market is predicted to experience a compound annual growth rate of 14% until 2030. Being the clear leader in the industry, Amazon is well-positioned to capture a significant portion of this growth. Moreover, the solid margins generated by AWS contribute to expanding the overall business's profits.
In 2022, several tech stocks, including Amazon, suffered significant losses. However, 2023 has been a rebound year for Amazon, yet its shares still trade below their peak.
Despite these promising growth prospects and the company's rebound, Amazon's stock currently carries a price-to-sales (P/S) ratio of 2.6. While this may appear more expensive than six months ago, it remains notably cheaper than Amazon's five-year historical average P/S multiple of 3.5.
In conclusion, Amazon's exceptional product offering and solid growth prospects present compelling reasons to consider investing in the company. Additionally, the current attractive valuation may serve as an additional factor for including Amazon in one's investment portfolio.
As long as the price is above 125.00, follow the recommendations below:
- Time frame: D1
- Recommendation: long position
- Entry point: 132.62
- Take Profit 1: 136.00
- Take Profit 2: 143.00
Alternative scenario:
If the level of 125.00 is broken-down, follow the recommendations below:
- Time frame: D1
- Recommendation: short position
- Entry point: 125.00
- Take Profit 1: 120.00
- Take Profit 2: 113.00
