Due to its prevailing position in various sectors, Amazon ( AMZN 0.51% ) It could be considered unmatched. With remarkable expansion and a stock price increase of 9,280% over the last two decades, this massive technology company now boasts a market capitalization of $1.75 trillion. This surpasses the gross domestic product (GDP) of all but 11 nations.
Numerous investors may be questioning whether satisfactory returns are still possible in the future. Is it the right time to invest in Amazon stock?
Amazon’s expansion is still ongoing.
With a net sales of $604 billion over the last year, it’s natural to wonder about the potential for further growth for Amazon moving forward. Given the challenge of expanding revenue on such a substantial sales foundation, the question arises about the future prospects for the company.
Based on the predictions of financial experts on Wall Street, Amazon is expected to grow its revenue by an average of 10.8% annually from 2023 to 2026. While it’s wise to be cautious about such forecasts, this optimistic forecast is definitely promising.
It is easy to envision that there will be sustained substantial growth. Amazon possesses a multitude of opportunities. favorable trends in the secular world that are driving it ahead.
One notable trend is the increasing popularity of online shopping, with Amazon being a major player in this field. Statista reports that Amazon.com accounts for 38% of all online retail spending in the United States. Despite the fact that the majority (84%) of retail purchases in the U.S. are still made in physical stores, Amazon is expected to continue experiencing consistent growth in the foreseeable future.
Amazon is leveraging its dominant cloud computing platform, Amazon Web Services (AWS), which holds a significant portion of the global market share at 31%. The company is capitalizing on the transition of IT expenditure from on-premises to off-premises. Additionally, the cloud computing industry is expected to experience substantial growth. With Amazon’s substantial investments in artificial intelligence (AI) to enhance AWS, this sector is positioned for significant success.
Investors must pay attention to the evolving media environment, as the internet has enabled the rise of streaming entertainment. Amazon Prime Video is a prominent player in this space, as indicated by Nielsen data showing its strong position. Alphabet ‘s YouTube and Netflix regarding the amount of time spent watching television on a daily basis in the United States
A lesser-known yet rapidly growing sector within Amazon is digital advertising, which experienced a 20% increase in revenue in the most recent quarter, reaching $12.8 billion. With billions of active shoppers browsing Amazon.com every month, the company is able to showcase valuable advertisements.
These strong ongoing trends are expected to continue for the next ten years and beyond, providing ample opportunities for Amazon to capitalize on.
Buy the dip
Between the beginning of 2024 and July 2, when Amazon’s stock reached its highest point, the shares had increased by 32%. However, the situation has changed since that time. The stock is now trading 17% lower than its peak.
The conditions are very advantageous for potential investors. Stocks are being offered at a competitive price. The ratio of the company’s market capitalization to its total revenue. This indicates a reduction compared to the valuation multiples of the past five and ten years.
In addition to the possibility of significant revenue growth, Amazon is also expected to experience substantial profit growth. The company’s management has been dedicated to reducing expenses, which has been successful. In the second quarter, Amazon achieved $14.7 billion in operating income, marking a 91% increase compared to the previous year.
Analysts predict that between 2023 and 2026, earnings per share will increase annually by 36.8%. This indicates that there is still an opportunity to invest in Amazon and potentially receive satisfactory returns.
