The list of businesses that have rewarded investors more than Amazon(NASDAQ: AMZN) has in the past two decades is certainly very small. The tech juggernaut's shares have skyrocketed 4,760% since May 2004, making some people very rich along the way.
With the company now worth a whopping $1.9 trillion and having generated $575 billion in 2023 net sales, investors are probably wondering what the future holds.
Is Amazon a good stock to buy right now? Here are some factors to consider.
The growth story continues
If a business achieves the massive scale that Amazon has, it's reasonable to assume that there won't be much growth going forward. But here's where the company can prove you wrong. In fact, Amazon still has multiple growth engines it can lean on in the years ahead.
Here in the U.S., online shopping currently makes up less than 16% of all retail spending. As e-commerce continues to steal share from brick-and-mortar retail, Amazon is poised to capture a large chunk of that trend. According to Statista, almost 40% of all the money spent online in this country goes through Amazon.
With Amazon Web Services (AWS), cloud computing is an area that the business is very focused on. This segment posted revenue growth of 17% in Q1, now at an annualized run rate of $100 billion. Given AWS' tremendous trailing-12-month operating margin of 31%, it's going to continue boosting the overall company's bottom line in the years ahead.
Thanks to its broad suite of AI-related products and services that can help businesses better serve their employees and customers, AWS is already finding demand from major clients, like Accenture, Siemens, and Volkswagen. As more companies keep transitioning to a cloud-based environment, AWS will look to be an even more important infrastructure partner.
With $11.8 billion in revenue in the last three months, digital advertising is undoubtedly becoming a more important aspect of the Amazon machine. With the popular online marketplace attracting so much attention, as well as the Prime Video streaming service, the company has valuable properties that it can monetize.
All of these powerful secular trends simply mean that Amazon is set to increase its sales. Wall Street consensus analyst estimates call for revenue to rise at a compound annual rate of 11.2% between 2023 and 2026.
Add Amazon to the shopping cart
Even though the stock has been a fantastic winner historically, it's not expensive right now, trading at a price-to-sales ratio of 3.3. That's about in line with its trailing-10-year average.
Besides the growth trends I discussed, investors would be acquiring a business that has a wide economic moat. In fact, Amazon is one of the most competitively advantaged enterprises on the face of the planet.
For starters, the company has unrivaled scale, particularly as it relates to the e-commerce segment. Amazon has spent so much time and money on building its sprawling logistics footprint that it can ship products at much lower cost than others. This will help the business maintain its lead when it comes to online shopping.
In the internet age, data is the new oil. The only difference is that data is infinite. Companies that can not only collect massive amounts of data, but also leverage it to better serve their user base, will continue to be the big winners.
Here's where AWS truly shines. "AWS not only has the broadest array of storage, database, analytics, and data management services for customers, it also has more customers and data store than anybody else," CEO Andy Jassy said on the Q2 2023 earnings call. This means the company has the insights that can inform its product development, solidifying its position as a mission-critical partner for clients.
Amazon may be one of the world's most valuable companies. But it's still worthy of a spot in your portfolio.
Should you invest $1,000 in Amazon right now?
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Neil Patel and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Accenture Plc, Amazon, and Volkswagen Ag. The Motley Fool recommends the following options: long January 2025 $290 calls on Accenture Plc and short January 2025 $310 calls on Accenture Plc. The Motley Fool has a disclosure policy.
