Encounter the formidable Stock Behemoth that Persistently Outperforms the Market
With Amazon's soaring performance in the stock market, the spotlight is on the e-commerce and cloud giant, which saw a near 50% rise in value over the previous year. Propelled by the escalating success of e-commerce and the surge in artificial intelligence (AI), Amazon's cloud sector continued to thrive. But, as the market cap surpasses $2.4 trillion, the question arises: can this growth continue?
To boost growth, Amazon has transformed into a series of comparatively smaller enterprises instead of a colossal conglomerate. Breaking down their two e-commerce segments – North America and international – and Amazon Web Services (AWS), their cloud and AI arm, Amazon's unique strategy comes to light.
On the e-commerce side, revenue from North America and international segments combined clocked in at $18 billion with an average operating margin of 5.8% and 2.5%, respectively, in the first nine months of 2024. Despite a modest 6% growth for their online stores, North America and international segments supported double-digit revenue increases for their third-party seller services, advertising services, and subscription services.
Meanwhile, energy emanates from AWS, which generated 20% revenue growth in Q3 2024, boasting more than $79 billion in revenue. The segment's contribution to Amazon's overall revenue was 18%, but its operating income for the first nine months of 2024 surged by 62%, positioning AWS with an impressive 37% operating margin.
Investors focusing on Amazon as a conglomerate may not fully appreciate its array of less capital-intensive, tech-related businesses, which generate substantial revenues. By evaluating these individual enterprises, they can uncover lucrative growth prospects for the company as a whole.
The projections for Amazon's future suggest they will continue to thrive. Grand View Research forecasts a compound annual growth rate (CAGR) of 19% for the global e-commerce market and 21% for the global cloud computing market through 2030. Amazon, as the market leader in these thriving industries, is poised to reap the benefits, likely securing a large share of these growth potentials.
Grand View Research projects that Amazon's revenue will swell by 11% in 2024 and maintain the same growth rate in 2025. While this may not be as brisk as Shopify's impressive yearly revenue growth, it'll be enough to fuel meaningful profit hikes for Amazon.
Investors analyzing Amazon's price-to-earnings (P/E) ratio of 50 might question its valuation. However, Amazon has a rich history of exceeding these multiples. Moreover, its P/E ratio is still at a manageable level compared to Shopify's lofty 99 pricing, making Amazon an enticing choice for cash-rich investors.
Amazon's seemingly massive size and sluggish online sales growth may appear intimidating, but these factors only serve to fuel the growth of its smaller, profit-generating enterprises. Its expanding cloud computing segment maintains its technological dominance, and the potential for boosting patrons and revitalizing offerings in the growing online pharmacy sector have both contributed to Amazon's continued success.
In conclusion, Amazon's dizzying growth projections justify this evaluation, despite the colossal market cap and slower-growing online sales segment. Their thriving AWS, e-commerce, and expanding pharmacy services will uphold its established position as the market leader.
To maximize returns, investors should consider the various tech-driven businesses within Amazon, such as its e-commerce segments and AWS. These areas have shown significant revenue growth, with AWS generating a 62% operating income increase in the first nine months of 2024. (investing, money, finance)
Grand View Research predicts a 19% compound annual growth rate for the global e-commerce market and a 21% growth rate for the cloud computing market through 2030, positioning Amazon as a prime beneficiary of this expansion. (investing, money, finance)
