Pondering Over Purchasing Amazon Shares Today for Lifelong Financial Security?
Amazon (AMZN, -0.76% decreased) has been a life-altering investment for numerous investors who purchased early and continued to hold onto their shares. If you had invested $1,000 in Amazon stock 20 years ago, you'd now have over $100,000.
If you had invested that same sum on the initial day of Amazon's stock trading, on May 15, 1997, you'd have profited over $2 million!
While those times are long gone, Amazon isn't. Is investing in Amazon today still capable of setting you up financially for life?
The titan of e-commerce
Amazon seldom discloses details about its Prime membership, merely stating that it's expanding. As of recent updates, it boasted over 200 million subscribers globally. In the U.S., consumer tracking firms approximate the number to be around 180 million.
That's a sizable population that relies on Amazon for everyday items, from bread slices to diamond earrings. Amazon now accounts for nearly 38% of all U.S. e-commerce and consistently upgrades its platform to snatch additional market share. The company's sales in the U.S. grew by 9% annually, while overseas sales increased by 12%.
Sales growth
Amazon made a significant shift two years ago by transitioning from a national fulfillment network to a regional one. This allows them to keep their warehouses stocked with best-selling products, enabling faster delivery to customers due to closer proximity.
12%
The company is currently refining this program and optimizing its systems for efficiently transporting items to the regional warehouses. Additionally, Amazon has been investing in its robotics systems, which will eventually save time and money by streamlining operations.
9%
Amazon opened a new facility utilizing advanced robotics technology, resulting in a 25% improvement in delivery times, and improved same and next-day deliveries. This is projected to create a 25% cost savings going forward.
22%
At the height of the pandemic, when e-commerce soared and retailers without an e-commerce presence rushed to establish one, it seemed as though Amazon may lose market share. However, it successfully handled record-high demand and continues to offer products with delivery speeds that other companies can't match, making it well-positioned to become an even larger e-commerce provider in the future.
44%
The leader in cloud computing
20%
Amazon offers cloud computing services under the Amazon Web Services (AWS) banner and holds the top spot globally. Recently, AWS has added an array of advanced AI services to its platform, generating excitement and confidence in Amazon's business.
31%
AWS was Amazon's fastest-growing segment for a considerable period, accounting for more than 30% growth in a typical quarter. Also, AWS consistently surpassed half of the company's total operating income (nearly 60% in the third quarter).
Growth in sales had dramatically slowed where inflation surged, and spending decreased, but it is now resuming its ascent. AWS sales rose by 19% year over year in the third quarter, tying advertising as the fastest-growing segment.
Not only are clients investing in cloud services again, but Amazon also provides innovative AI services that can save clients money and time, such as coding with prompts instead of the time-consuming manual entry. AWS has introduced more AI features within the past 18 months than all of the other leading providers collectively.
The AI market is experiencing exponential growth and is already a multibillion-dollar 'run rate' business. However, CEO Andy Jassy has emphasized several times that it's still in its infancy, and this is a rare opportunity that hardly presents itself.
How high can Amazon stock climb?
Despite its high market value, Amazon isn't guaranteed to set you up for life on its own. That status is reserved for young growth stocks with a substantial degree of risk. Take note of the deceleration in growth over the past few years, partly due to pandemic-related challenges:
| Metric | 2023 | 2022 | 2021 | 2020 | 2019 | 2018 || --- | --- | --- | --- | --- | --- | --- || Sales growth | 12% | 9% | 22% | 44% | 20% | 31% |
However, Amazon is a sound long-term investment that could greatly enhance a diversified portfolio. Its growth potential is substantial, backed by its dominance in two expanding industries and a strong market position in others that weren't even touched upon.
I recommend buying Amazon stock as part of a diversified portfolio, but seek out other stocks to amplify growth.
In light of Amazon's continued dominance in both e-commerce and cloud computing, many investors are considering if investing in Amazon today can provide significant financial gains. As reported, Amazon's sales in the U.S. and overseas increased by 9% and 12% respectively, and its cloud computing division, AWS, sustained impressive growth with over 30% of the company's total operating income.
If you have extra money to invest, you might consider adding Amazon stock to a diversified portfolio due to its substantial growth potential. However, it's essential to remember that Amazon isn't a 'guaranteed lifesaver' investment, and diversifying your portfolio with other high-growth stocks may further amplify your gains.
