Your perspective on this matter could focus on its past performance or potential future growth.
Amazon’s (NASDAQ: AMZN) stock has risen by 55% this year, making some investors wonder if they’ve missed their investment opportunity. However, proponents of the stock argue that Amazon’s growth potential is still significant. So what should you consider? Let’s delve deeper into the arguments.
The Skeptic’s View: Most Profits Have Already Been Cashed In
Skeptics or “bears” of Amazon point to the stark fact that Amazon’s shares have already seen a significant increase in 2023. Among the 100 stocks that comprise the Nasdaq 100, Amazon ranks eighth, outperforming heavyweights like Apple (up 47%), Microsoft (up 41%), and Alphabet (up 35%).
According to these skeptics, the rally we’ve seen this year could potentially unravel, driven by various elements such as:
- Decreased consumer or business expenditure.
- A potential recession due to the Federal Reserve’s interest rate hikes.
- A possible slump in the general stock market.
Furthermore, Amazon’s shares’ high price-to-earnings (P/E) ratio is not to be overlooked. The shares trade at 310 times earnings, the highest since 2016.
The Optimist’s View: Promising Future Ahead
On the contrary, the “bulls” of Amazon are not overly concerned with the stock’s past but rather its potential future. Their most robust case for owning shares rests on the company’s promising long-term prospects.
Consider the hottest trend in investing: artificial intelligence (AI). Amazon has pioneered AI assistants, with over 500 million Alexa-enabled devices sold globally. The company also utilizes AI and machine learning to optimize product placement, create descriptions, and manage inventory.
Optimists also highlight the stock’s price-to-sales (P/S) ratio as a counter-argument against the notion that the shares are overpriced. Currently, at 2.5, it is still below its 10-year average of 3.1.
Should You Invest in Amazon Now?
Amazon exemplifies the concept of letting your winners run. For instance, a $10,000 investment in the stock a decade ago would now be valued at $90,790.
More importantly, this tech giant seems to have significant potential for further growth. Amazon’s cloud segment, Amazon Web Services (AWS), still holds the lion’s share in the rapidly growing cloud services industry, estimated to currently be worth more than $500 billion and projected to surpass $800 billion by 2027, according to some analysts.
Moreover, its vast e-commerce business boasts over 200 million Prime members. The profitability of this segment seems to be on the rise as the management implements cost-saving measures such as downsizing the workforce and pausing specific construction projects.
In conclusion, Amazon continues to be an industrial powerhouse. It has a robust growth model, particularly its leadership in the burgeoning cloud services market. The company’s management has also shown adeptness in implementing necessary cost-cutting measures. Such a blend is rarely too late to put your money into.
Whether you view Amazon as a missed opportunity or a continual growth prospect largely depends on your investment perspective. Its past performance and current market standing have been impressive, but its future potential, particularly in AI and cloud services, is also compelling. With a demonstrated ability to manage costs and an e-commerce segment boasting a significant customer base, the tech titan shows promise for further expansion. Ultimately, in investing, there’s rarely a “too late” – it’s more about whether the current conditions align with your financial goals and risk tolerance.
