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The Magnificent Seven stocks control a disproportionate share of the world’s technology sector. Regardless of what the other thousands of stocks are doing, these seven stocks alone can cause large swings in the entire market. In fact, the combined market capitalization of these seven stocks is over $13 trillion, and six of the seven stocks are in the trillion dollar class.
king of e-commerce Amazon (NASDAQ:AMZN) has a market capitalization of $1.8 trillion, and its stock price has increased 77% over the past year. At this level, can you go higher?
Is Amazon just getting started?
Amazon already accounts for about 38% of all U.S. e-commerce, which is impressive, and it accounts for 31% of all cloud computing business, which is equally outstanding. So while we can’t say it’s early days, the runway for growth still looks wide open considering the opportunities ahead.
In e-commerce, the company recently upgraded its logistics system from a national network to a regional network. The company stores more of its best-selling products in multiple warehouses across the country, making it easier, faster and cheaper to get products to customers.
The potential for growth in e-commerce seems endless. According to Statista, the share of e-commerce in total retail sales is expected to continue increasing from 19.4% in 2023 to 22.6% in 2027. Amazon has a virtually unbeatable moat in e-commerce. The faster orders get to customers, the more the moat will be filled and the more companies will benefit from the continued shift to e-commerce.
In cloud computing, Amazon Web Services (AWS) continues to ink new deals with high-profile customers, including: amgen and sales force. CEO Andy Jassy said AWS has a strong pipeline of new customers and large, long-term commitments as the cost optimization that had been holding customers back from investing in his program continues to “weak.” He said there is.
In some areas, Amazon is just getting started. The fastest growing business today is advertising, a recently launched segment. Fourth quarter sales increased 27% year over year. We are also working on healthcare.
AI changes everything
Amazon is an artificial intelligence (AI) superstar, developing industry-leading tools and capabilities across a wide range of businesses.
It starts with AWS. Amazon made headlines last year when it announced powerful generative AI services for enterprise customers. We continue to introduce and improve these tools to help developers and businesses work faster and more efficiently.
AI has always been a key element of e-commerce businesses. Amazon can identify exactly what customers are looking for based on their browsing habits and powerful AI, increasing conversion rates. It’s also essential for advertising because it allows advertisers to reach Amazon’s hundreds of millions of customers at a time when they’re already looking for the products they’re selling.
It’s worth noting that AWS and advertising are high-margin businesses compared to e-commerce. As these businesses grow, not only will their sales increase, but their profits will also increase further. Amazon’s stock price has historically been correlated with its operating profit, the company’s preferred earnings metric, so a rise in operating profit should lead to a corresponding rise in its stock price.
This growth story isn’t over yet.
Management expects first-quarter 2024 sales to increase about 10% year-over-year and operating profit to double to about $10 billion. If that happens, stock prices are likely to follow suit. The company has not yet released its outlook for the rest of the year, but tailwinds are growing.
Amazon has a long runway of growth in so many areas, and its stock has the potential to continue to generate tremendous shareholder value.
Should you invest $1,000 in Amazon right now?
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John Mackey, former CEO of Amazon subsidiary Whole Foods Market, is a member of the Motley Fool’s board of directors. Jennifer Cybill has no position in any stocks mentioned. The Motley Fool owns a position in and recommends Amazon. The Motley Fool has a disclosure policy.
The Magnificent Seven’s stock is up 77% in the past year, and it could rise even further.Original article by The Motley Fool
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