Does Amazon Stock Have Room for Growth Left?

Anyone with an Internet connection knows what Amazon (AMZN) is. 

AMZN has long been highly touted, and the last couple of years cemented its reputation. The stock gained significant momentum in 2020, when hundreds of millions of people around the world, who were locked in, turned to the e-commerce giant to deliver goods and supplies to their homes. 

Amazon operates across multiple spheres such as e-commerce, cloud computing, digital streaming, and artificial intelligence. It is one of the big five companies in the U.S., and is often referred to as one of the most influential economic and cultural forces in the world. I am bullish on the stock.

Amazon has gained recognition as one of the world’s most valuable brands. This is because its founder Jeff Bezos likes to keep the “Day 1” mentality. This means the company’s management continues to think like a startup no matter how much bigger its scale of operations gets with the passage of time. 

Moreover, the company still has plenty of room for the growth of its current business segments. For example, its E-commerce segment’s share of total sales in the third quarter of 2021 accounted for only 13%, thereby implying Amazon still has a massive 87% opportunity to grow its sales.

Eric Sheridan of Goldman Sachs holds a similar view, and therefore maintained a Buy rating on AMZN with a $4,100 price target (44% upside potential). He named Amazon as the best idea in the Internet space for 2022 because the company has multiple verticals poised for growth. 

Growth of Online Retail

With the onset of the pandemic, the online retail market got nitro boosters. According to Oberlo, global e-commerce sales are expected to exceed $7.385 trillion in 2025 from the $4.213 trillion recorded back in 2020. 

Research by Statista further solidifies this claim. The research shows that while e-commerce sales constituted less than 5% of the total sales in the U.S. back in 2010, the same number crossed the 15% mark in the second quarter of 2020.

Amazon is in a mood to capitalize on this rising demand and can perhaps benefit from this trend more than any other company. To gain maximum benefits in recent years the company has aggressively invested in building up its fulfillment network so as to offer one-day or even same-day delivery services to its customers.

Growing Sales and Cash Flows

Amazon has been operating efficiently and has sustained or even expanded its level of sales over the years. Catalyzing on the benefits of increased sales and demand, the company was able to increase its revenue by a massive $96.1 billion in the third quarter of 2020 representing a 37% increase over the year. 

The operating cash flows also increased by a whopping 56% during the same period. Amazon’s financials in the third quarter of 2021 were also good enough, but nothing compared to what it had recorded in 2020. Net income decreased by $3.2 billion and the operating cash flows also decreased by 1% year-over-year. However, net sales did increase by 15% for the same period. 

AMZN stock earns a Strong Buy consensus rating from TipRanks, based on 30 unanimous Buy ratings.

The average Amazon price target of $4,150.83 suggests 47.8% upside potential.

More Than E-Commerce

As per Grand View Research, the global cloud computing market is expected to grow over 19% annually and might surpass $1.2 trillion by 2028. The rising rates of penetration of the Internet, increased demand for high-speed data, as well as increased adoption of new-edge technologies like 5G and artificial intelligence (AI) has led to such a surge in its demand.  

As a result of this increased demand, infrastructure-as-a-service (IaaS) providers like Amazon are likely to enjoy impressive growth opportunities. Also, Amazon Web Services (AWS) is a clear market leader in this segment – having a roughly 32% share of the industry – and is therefore in a perfect position to reap the benefits of such rising demand.

Amazon is a growing company and offers one of the best investment opportunities. Instances like adding millions of customers since the onset of the pandemic or investing billions to enhance business operations are about to contribute to the company’s growth in the coming years.

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