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Amazon (AMZN 2.66%) Investors have been on a roller coaster ride in recent years. The company’s stock hit an all-time high in 2021 as its e-commerce site became the go-to for homebound consumers around the world during coronavirus lockdowns. However, due to the economic downturn in 2022, the company’s stock price plummeted, losing everything it had gained in the previous year.
The retail giant has had an impressive turnaround in 2023, with its share price up around 75% over the past 12 months, along with strong profit growth. However, the stock price is still down from the highs achieved in 2021 (as shown in the chart below), suggesting it may still have a lot to offer new investors.
Data by YCharts
Amazon has experienced significant growth over the last year and shows no signs of slowing down. The company is leading in his two high-growth markets with huge revenue potential, and recent cost-cutting moves strengthen the business in the long term.
So here’s one growth stock that’s down 22% that you can buy right now.
Amazon made a remarkable recovery in 2023
Amazon improved in almost every way last year. After experiencing a 50% share price plunge and a significant drop in revenue in 2022, the company began restructuring its business to prioritize profits.
Cost-cutting measures such as closing dozens of warehouses, shutting down unprofitable projects like Amazon Care, and laying off thousands of employees strengthen Amazon’s future and position it against future macroeconomic headwinds. No longer vulnerable. In fact, recent moves have seen the company’s free cash flow increase by 427% in the last twelve months.
Additionally, Amazon delivered multiple quarters of results that beat analyst expectations. The tech giant’s revenue for the third quarter of 2023 rose 13% year over year to $143 billion, beating Wall Street expectations by more than $1.5 billion.
Growth in the period was primarily due to improvements in our e-commerce business. Operating profit for Amazon’s North American division exceeded $4 billion, up sharply from a $412 million loss in the same period last year.
Amazon’s resurgence last year shows why its stock is one of the most reliable options. The company has proven its resilience and ability to navigate difficult market conditions.
Huge profit potential in multiple areas of technology
Amazon has come a long way since its beginnings as a Seattle-based online book retailer in 1994.
The company has expanded into a wide range of markets, including e-commerce, cloud computing, grocery stores, video and music streaming, consumer robotics, and even space satellites. Amazon has so much influence over the entire consumer market that it has even unintentionally dominated certain areas, such as accounting for 68% of video game purchases in the United States.
Amazon’s position in several industries means it has great revenue potential. Own e-commerce is expected to exceed $3.5 trillion this year and grow at a compound annual growth rate of 9% through at least 2028. Meanwhile, the company holds the top share of online retail in multiple countries, at 38%.Share in the US
But the company’s most lucrative business is Amazon Web Services (AWS). Cloud platforms account for more than 62% of the company’s operating profit, despite having the lowest revenue of the three segments. In the third quarter of 2023, AWS achieved a profit of nearly $7 billion, recording a year-over-year growth of 29%.
The cloud market is rapidly expanding due to the rise of artificial intelligence (AI). Businesses are increasingly looking for ways to leverage AI to increase efficiency and are turning to cloud services to do so. Meanwhile, AWS leads the market in cloud computing with 32% market share and stands to benefit greatly as AI develops.
Data by YCharts
This chart shows that Amazon’s earnings could reach nearly $5 per share by fiscal year 2025. Multiplying this number by the company’s forward price-to-earnings ratio of 41 yields a stock price of $193, which is expected to grow 33% over the next two fiscal years.
Given its impressive growth over the past year and its position in several highly profitable markets, it makes sense that Amazon’s stock is a hot topic right now.
John Mackey, former CEO of Amazon subsidiary Whole Foods Market, is a member of the Motley Fool’s board of directors. Dani Cook has no position in any stocks mentioned. The Motley Fool owns a position in and recommends Amazon. The Motley Fool has a disclosure policy.
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