Source: PaxForex Premium Analytics Portal, Fundamental Insight
The S&P 500 Index has surged by over 20% from its bear market low, prompting discussions about the emergence of a bull market. However, it may be a tad premature to declare this transition since, typically, the index must also attain a new all-time high to officially mark the beginning of a new growth phase. Nevertheless, it's evident that we are on the cusp of the next bull market, making it an opportune moment to consider investments in stocks that stand to gain the most.
Amazon is one such contender. While the stock has already demonstrated considerable momentum, registering double-digit gains since the year began, it still possesses ample potential for further growth, particularly within a market environment that favors companies with robust expansion prospects. Here are three compelling reasons to contemplate acquiring shares in this market behemoth:
- Dominance in Two Thriving Markets
Amazon holds a commanding position in two rapidly expanding sectors: e-commerce and cloud computing. Both of these domains are poised for double-digit growth throughout this decade, and Amazon is strategically positioned to reap the rewards.
In the realm of e-commerce, the company is continuously fortifying its Prime membership service, with a special emphasis on the swift delivery of orders. Significant strides have already been made in this regard. Presently, Amazon offers same-day or one-day delivery for a multitude of top products. During the second quarter, more than half of all Prime orders in the 60 largest US metropolitan areas were delivered within this timeframe. Amazon's data underscores the significance of speedy delivery, as customers tend to make more frequent purchases when assured of rapid order fulfillment.
Regarding cloud computing, Amazon Web Services (AWS) holds a commanding lead in the market. Amazon has observed that customers, who were grappling with budget constraints earlier in the year, are now rebounding. AWS has witnessed a resurgence in customers initiating new projects, a positive development since AWS typically contributes significantly to Amazon's profits.
- An Adaptive Cost Structure for Success
In the face of higher inflation and broader economic challenges that impacted Amazon's earnings last year, the company proactively responded. Amazon made significant enhancements to its cost structure by implementing measures such as workforce reductions, strategic investments in rapidly growing sectors like technology infrastructure, and optimizing its fulfillment network.
Speaking of fulfillment, a particularly noteworthy strategic move has the potential to substantially enhance Amazon's efficiency over time. The company transitioned from a national fulfillment model to a regionalized one. Instead of routing your order across the entire country to your doorstep, it is dispatched from a regional center located closer to your residence.
These concerted efforts have proven effective, especially during economically challenging times, and have contributed to the recovery and growth of Amazon's earnings. In the most recent quarter, Amazon witnessed a shift in its free cash flow from outflow to inflow, accompanied by increases in both operating income and net sales. Furthermore, these cost structure improvements are poised to benefit Amazon during prosperous periods as well, fostering stronger growth and potentially yielding gains in share prices.
- Amazon's Prepared to Leverage the AI Revolution
Amazon has been incorporating artificial intelligence (AI) into its operations for a considerable duration. AI plays a pivotal role, for instance, in the e-commerce site's product recommendations, drawing insights from your prior purchases. Moreover, Amazon harnesses AI in various aspects of logistics, encompassing supply management and optimizing delivery routes.
In recent times, Amazon has significantly ramped up its commitment to this powerful technology, deploying AI for tasks such as identifying defective products and enhancing the capabilities of its smart assistant, Alexa. The company recently unveiled an Alexa iteration capable of engaging in meaningful conversations with users and performing a range of everyday tasks. Hence, Amazon is leveraging AI to enhance operational efficiency and better cater to the needs of its e-commerce clientele.
Amazon Web Services (AWS) is also making substantial strides in the realm of AI, developing products that simplify the adoption of this technology for its cloud computing customers. For instance, with Amazon Bedrock, clients can construct AI applications without the complexities of managing infrastructure. They can readily leverage the provided foundational models, tailor them to suit their specific business requirements, and utilize AWS tools for deploying these applications.
In summary, it's reasonable to assert that Amazon stands to benefit significantly from the ongoing AI revolution, potentially realizing cost savings, operational efficiency enhancements, and revenue growth. These advantages have the potential to translate into robust long-term performance for Amazon's shares.
As long as the price is below 130.00, follow the recommendations below:
- Time frame: D1
- Recommendation: short position
- Entry point: 125.16
- Take Profit 1: 120.00
- Take Profit 2: 113.00
Alternative scenario:
If the level of 130.00 is broken-out, follow the recommendations below:
- Time frame: D1
- Recommendation: long position
- Entry point: 130.00
- Take Profit 1: 135.00
- Take Profit 2: 140.00
