Amazon’s (NASDAQ:AMZN) venture into generative AI has reshaped its e-commerce business focus. By infusing AI across its platform and AWS, Amazon elevates its offerings. Amazon Bedrock, integrating top AI models, enriches developer capabilities. This is a key part of my AMZN stock analysis.
Additionally, Amazon CodeWhisperer boosts coder productivity with AI-generated code suggestions. Enhanced Alexa models ensure natural interactions. These AI integrations position Amazon as a retail innovation leader, improving customer experience and potentially driving sales.
Here are two reasons why buying and holding AMZN stock now is your next big move.
Starting Strong
Amazon is probably the e-Commerce giant worldwide, despite what other analysts would say. It collaborates with Owkin and Choice Hotels International to expand AWS usage, potentially boosting its market reach.
Two years ago, when almost every market was down, and the Nasdaq-100 Technology sector saw a 40% decline, Amazon went down deeper by 50%. However, Amazon did not strut and showed resilience through and through.
The company went on a deep restructuring that involved prioritizing profitability through layoffs and warehouse closures, which are necessary cost-reduction measures Amazon had to do.
In its recent earnings report, the company showcased net sales up to 13.9%. Operating income rose 382.6% to $13.21B. Net income reached $10.62B, with $1 EPS. Q1 2024 estimates foresee revenue up 11.9% and EPS growth of 171.8%.
Lastly, Amazon benefits from industry growth. Q4 revenue beats expectations at $105.5B, boosted by improved logistics and AI-driven cloud services.
AWS Drives the Company
Amazon sees its fastest growth in AWS, contributing 60% of its Q3 2023 operating income. The surge in cloud demand, fueled by the pandemic and AI integration, forecasts substantial market expansion.
In Q4, Amazon’s cloud division met revenue expectations, emphasizing AI services. AWS launched Q chatbot and Trainium2 chip to match AI demand. In line with forecasts, Q4 revenue hit $24.20 billion, with growth accelerating to 13%. Microsoft’s Azure and Google Cloud outpaced AWS in growth. This is central to my AMZN stock analysis.
In the past year, AWS expanded its AI tools and revealed plans for chip production, potentially making Amazon a formidable player in AI. Despite a dip in stock price, Amazon’s EPS estimates suggest significant growth potential, with projections indicating a 36% increase by fiscal 2024.
Joining Dow Jones
Amazon’s inclusion in the Dow Jones Industrial Average, supplanting Walgreens, broadens the index’s retail exposure. This move follows Walmart’s stock split, enhancing representation across sectors. With its dominance in online retail and presence in cloud computing and entertainment, Amazon embodies the Dow’s representation of US commerce, noted Quincy Krosby, chief global strategist at LPL Financial.’
The change became effective Monday. Despite remaining in the Dow, Walmart will see its weight reduced due to an upcoming stock split. Uber replaces JetBlue in the Dow Jones Transportation Average, marking the index’s exposure to ride-hailing. Amazon’s inclusion is the first since 2020, replacing Walgreens, which joined in 2018.
Hoard AMZN Stocks While Cheap
Amazon remains attractively priced for investors, trading below its intrinsic value at $170, despite its actual value estimated at $241.72. This valuation presents a compelling opportunity for investors to consider acquiring shares at a discount.
The stock’s volatility also provides further potential for purchasing opportunities, given its tendency to fluctuate unpredictably.
This volatility, indicated by its high beta, suggests that the stock’s price can deviate significantly from the overall market movement, offering investors the chance to capitalize on potential price dips or surges in the future. This concludes my AMZN stock analysis.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
