Despite having a few setbacks to reach the $3 trillion market cap for the first time, Amazon (NASDAQ: AMZN) still has a long way to grow. A company that started three decades ago and bills itself as the World’s Largest Bookstore has somehow been very successful with that goal.
Amazon is a consumer, technology, and consumer technology company. There’s a good chance you’ll be a recent customer. But let’s not go ahead. I’ll give you three reasons why Amazon could be the best growth stock to buy this month.
|
Will AI create the world’s first trillionaire? Our team recently released a report on a little-known company, called “Indispensable Monopoly,” which provides critical technology needed by both Nvidia and Intel. Continue » |
1. AWS doesn’t move the needle; it is something needle
Total sales rose 17% in Amazon’s most recent quarter. That’s not much, but it’s the e-commerce bellwether’s strongest jump in more than four years. The driver pushing hard on the accelerator is Amazon Web Services (AWS), a cloud hosting platform whose sales rose 28%, the segment’s strongest move in more than three years.
Most people consider Amazon’s core business to be e-commerce, but check out AWS. It accounts for just over a fifth of the company’s revenue, but unlike Amazon’s weak online sales, the web services business consistently generates an operating margin of more than 35%. More than half of Amazon’s total operating profit is AWS’s handiwork.
2. Chips ahoy
Amazon received a blow earlier this year, when it announced that it would invest $200 billion in the cost of building its AI capabilities. Now, the market is starting to get it. AWS is the top dog among hyperscalers, controlling nearly a third of the global market.
The leading AI platforms are more dependent on Amazon, and they make sure that we are not at the mercy of others on the hardware end by creating its own AI chips. CEO Andy Jassy said last month that Amazon may start selling its energy-efficient AI chips to customers. And that is starting to happen. The social media giant Meta Platforms (NASDAQ: META) announced plans to use Amazon’s Graviton chips to fuel its AI efforts. Don’t be surprised when big ticket and model endorsement deals are announced.
3. Amazon is cheaper than you think
Amazon shares have risen 31% in the past year, just ahead of the general market. It’s up just 66% over the past five years, slightly behind the S&P 500. Meanwhile, revenue has nearly doubled in the past year, and its operating profit and net profit have more than quadrupled. As you might imagine when the stock’s fundamentals make circles around its stock performance, Amazon isn’t as expensive as you might think.
