Back in 2016, I initiated my position in Amazon (NASDAQ: AMZN). Over eight years, I trimmed it once, leaving me with a nearly 500% gain on my remaining shares. Amazon now dominates my portfolio, comprising 6.5%.
Image source: Amazon.
Reason 1: The Answer’s In the Spin
Between 2016 and 2023, Amazon saw a 23% compound annual growth in revenue and a 42% rise in split-adjusted EPS. Key to this was the growth of its online platforms and AWS, the world’s largest cloud service. This strategy, supported by AWS, gives Amazon a solid edge over retail competition with its diversified offerings.
Reason 2: Stabilization in Growth Rates
Having experienced a surge during the pandemic, Amazon saw a slowdown in revenue growth in 2022 but bounced back in 2023. Expansion in North America, International retail segments, and a resurgence in AWS growth hint at brighter days ahead.
Reason 3: Margin Expansion on Track
After a dip in 2022, Amazon’s operating margin climbed to 6.4% in 2023. Optimizations in its operations, a focus on higher-margin segments, and cost-cutting measures are expected to lift its operating margin further in 2024 and beyond.
Reason 4: A Beacon of Growth
Trading at 40 times forward earnings, Amazon may seem pricey, but the global e-commerce and cloud markets are poised for substantial growth. With double-digit growth potential in its core markets, Amazon’s leadership position is likely to endure.
Amazon’s Resilience
While Amazon is not impervious to external pressures and competition, its track record suggests it can maneuver through challenges and soar higher in the coming years.
Is Amazon a Good Investment?
Considering Amazon’s growth prospects and market position, holding onto its stock might be a strategic move for long-term investors.
