Amazon’s stock has surged in value, doubling since the start of 2023 and outperforming both the S&P 500 and other online retailer segments. The traditional operating segments of the company, such as online stores, third-party seller services, and advertising services, account for a majority of Amazon’s revenue. However, growth in these segments has been slowing due to increased competition in the market.
To stay competitive, Amazon has introduced commercials in its Prime Video offerings, leading to an increase in subscription revenue and advertising revenue. The company’s ability to target commercials effectively due to its vast data about subscribers gives it an edge over competitors. Additionally, Amazon has a strong presence in the cloud computing industry through Amazon Web Services (AWS), which has seen significant growth and accounts for a large portion of the company’s revenue.
AWS is expected to continue driving growth for Amazon as the cloud services industry is projected to grow significantly over the next decade. The company has been able to maintain its market leadership despite increased competition. Analysts forecast the company’s annual revenue for 2024 to be just below $640 billion. With a fair value of $179.61 per share based on historical ratios, Amazon is currently slightly overvalued, trading at $186.57. However, the potential for outperformance and continued growth in revenue support the stock as an investment opportunity.
Investors can consider alternative ways to gain exposure to Amazon, such as selling put options to purchase the stock at a specified price. By selling put options with a strike price at $180 for May 31 expiration, investors can collect premium while potentially buying shares of Amazon at a preferred price. This strategy allows for income generation and a lower entry point for purchasing the stock. Overall, with a strong GF score of 90 out of 100, Amazon remains a compelling option for investors looking to capitalize on the company’s growth potential in the e-commerce and cloud services sectors.
