Source: PaxForex Premium Analytics Portal, Fundamental Insight
Amazon stock is up 24% this year, outperforming the S&P 500. While it may not deliver the astronomical gains seen by early investors, Amazon remains a strong contender for market-beating performance in the future. Here are three compelling reasons why Amazon is still a no-brainer buy:
- E-commerce is Still Growing
Amazon is widely known as the largest e-commerce company in the world, and e-commerce remains its core growth engine. Amazon currently accounts for more than one-third of all e-commerce sales, a commanding lead that no competitor is likely to challenge in the near future.
Although Amazon lost some ground during the pandemic's peak, with many new businesses entering the online space, it is expected to increase its market share going forward. eMarketer projects Amazon will capture over 40% of all e-commerce sales this year, with further growth anticipated in the coming years.
E-commerce itself is expected to continue expanding as a percentage of total retail sales, growing from 20.3% this year to 23% by 2027. This organic growth trend plays in Amazon’s favor, boosting its revenue and margins. In fact, Amazon’s US and international stores segments increased 9% and 10%, respectively, year over year. Given Amazon’s massive scale, these percentages translate to billions of dollars in revenue growth.
CEO Andy Jassy noted that while inflation has led shoppers to switch to lower-priced brands, Amazon expects these numbers to accelerate as inflation moderates. Additionally, the company is focused on lowering costs through innovations in robotics, regionalized operations, and expanding same-day shipping facilities, which could further enhance profitability.
- A Major Contender in AI
While e-commerce drives a large share of Amazon’s revenue (62% in Q2), Amazon Web Services (AWS) is the company’s most profitable segment, accounting for 63% of operating income. AWS is also the largest cloud service provider globally, holding 31% of the market, ahead of key competitors like Microsoft and Google.
Amazon is heavily investing in artificial intelligence (AI), particularly in generative AI. The company aims to offer an extensive suite of AI services, catering to both small businesses with turnkey solutions and large enterprises seeking advanced customizations. Amazon’s scale enables it to offer these services at competitive rates. It partners with Nvidia for advanced chips while developing its own chips to reduce costs.
Amazon’s management believes they are still in the early stages of AI development, and the company is well-positioned to benefit from continued growth in both cloud computing and AI services.
- Advertising and New Ventures Are Just Beginning
Advertising is Amazon’s fastest-growing segment, with second-quarter advertising revenue increasing by 20% year over year. Amazon’s reach is invaluable to advertisers, especially third-party sellers looking to boost product visibility. The company leverages its AI capabilities to offer highly targeted advertising, giving advertisers the ability to reach specific customers with precision.
Amazon is also expanding into video advertising with an ad-supported tier for Prime streaming, which could become a significant revenue driver. The company aims to differentiate itself by offering fewer ads compared to other streaming services, enhancing the customer experience.
As always, Amazon continues to explore new business opportunities. From healthcare to autonomous vehicles, Amazon has a history of testing new markets that could eventually become its next major growth driver.
Although Amazon is already a massive company, it still has considerable growth potential across multiple sectors, including e-commerce, cloud computing, AI, advertising, and emerging businesses. With its market dominance, continued innovation, and the ability to tap into new growth drivers, Amazon remains a perennial winner. If you’re considering adding Amazon stock to your portfolio, now is an opportune time to invest.
As long as the price is above 185.00, follow the recommendations below:
- Time frame: D1
- Recommendation: long position
- Entry point: 188.53
- Take Profit 1: 200.00
- Take Profit 2: 210.00
Alternative scenario:
If the level of 185.00 is broken-down, follow the recommendations below:
- Time frame: D1
- Recommendation: short position
- Entry point: 185.00
- Take Profit 1: 175.00
- Take Profit 2: 165.00