Amazon: Up Substantially This Year, The Rally Isn’t Over

Jul. 27, 2023 2:26 AM ET Amazon.com, Inc. (AMZN)

Summary

• Amazon’s shares have increased by about 50% since the start of the year.
• It has maintained leading market share in e-commerce and cloud, two secular growth trends with plenty of tread left.
• Shares are attractively valued for continued accumulation, though one can never know what the market will do as earnings approach.

The article discusses the significant increase in Amazon’s stock price, which has risen over 50% since the beginning of the year. Despite the stock’s substantial gains, the author believes that the rally is not over and that Amazon’s business fundamentals remain strong.

Amazon’s leadership in both e-commerce and cloud services is highlighted. The company has captured nearly 40% of the retail e-commerce market in the United States, making it difficult for competitors to challenge its position. Similarly, in the cloud computing market, Amazon’s Amazon Web Services (AWS) holds around 33% of the global market share and remains a dominant player.

The article emphasizes that the industries in which Amazon operates, e-commerce, and cloud computing, are expected to experience significant growth in the coming years. Researchers predict that e-commerce could make up nearly 30% of U.S. retail by 2030, and the global cloud computing market is expected to reach $1.5 trillion by the end of the decade. As long as Amazon maintains its market share in these growing industries, it is poised for continued growth.

Regarding valuation, the article suggests that Amazon’s stock is still attractively priced despite its recent surge. The stock’s valuation, relative to operating cash flow, is below its average over the past decade, indicating potential for further investment returns.

The upcoming Q2 earnings report will be closely watched, with a focus on the company’s e-commerce business momentum and the growth of AWS. Strong results in these areas would bolster the investment thesis for Amazon.

In conclusion, the article presents a positive outlook for Amazon, given its leading position in e-commerce and cloud computing, the projected growth in these industries, and its attractive valuation. However, it acknowledges that market dynamics can be unpredictable, and investors should carefully consider the company’s performance and future prospects before making investment decisions.

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