3 Persuading Reasons to Consider Amazon Stock in 2024

Shareholders have witnessed a dramatic 66% rise in Amazon's stock value over the preceding year, marked by remarkable growth. Amazon has streamlined its financials and plunged into profitable arenas such as artificial intelligence (AI), positioning itself for potential substantial gains long-term.

The year 2023 was pivotal in Amazon's resurgence. Its e-commerce operations not only returned to profitability but the company also scaled up its cloud arm, Amazon Web Services (AWS). The upshot was a massive swell in earnings and free cash flow, establishing a robust fiscal foundation for 2024.

With a strategy focused on reducing costs and leveraging technological growth drivers, Amazon may be gearing up for another thriving year. Here are three compelling reasons why investing in Amazon stock in 2024 could be wise.

1. Profitable Reconfigurations Elevate Earnings

The widescale tech downturn of 2022 saw the Nasdaq-100 Technology Sector plunge by 40%, and Amazon shared in the downturn with a 50% dip in its stock price. However, adversity often vets the long-term viability of a business, and Amazon demonstrated resilience.

In response to the challenges, Amazon undertook significant restructuring focused on profit maximization, such as closing multiple warehouses, laying off thousands of employees, and shutting down loss-making endeavors like Amazon Care. These actions have been crucial for its comeback.

By the third quarter of 2023, Amazon's revenue had climbed by 13% over the previous year, outpacing Wall Street predictions by $1.5 billion. Simultaneously, operating income witnessed an impressive more-than-threefold increase. Significant credit goes to its e-commerce section, particularly in North America, which reversed its fortunes from a $412 million loss to over $4 billion in operating income.

Additionally, thanks to these strategic changes, Amazon's free cash flow surged by a stunning 427% to $17 billion. With its financials in their prime, the company is well equipped to persist investing and navigating future challenges.

2. AWS: A Prime Locus for Investment in Amazon

While Amazon's e-commerce site garners the most attention, contributing over 80% to its revenues, AWS has emerged as a formidable growth engine. In Q3 2023, AWS was responsible for 60% of Amazon's $11 billion operating income.

The cloud sector surged during and after the COVID-19 pandemic as businesses shifted online and embraced new working methods. The rise of cloud computing appears particularly promising in the AI sphere, with companies seeking productivity enhancement through AI services provided by cloud platforms.

Research predicts the AI market to grow at a compound annual growth rate of 37% through 2030, potentially surpassing the $1 trillion mark. AWS, commanding a leading 32% of the cloud market, stands to gain significantly as AI continues to advance.

Over the last year, AWS has expanded its AI capabilities and announced its intention to venture into chip production. With copious financial resources and considerable brand strength, Amazon is on track to become a dominant force in AI.

3. Amazon's Stock Has More Room to Grow in 2024

Despite the robust rally last year, Amazon's stock is still about 17% below its peak from July 2021. This suggests potential for further appreciation in the stock price in the coming year. Earning per share (EPS) projections underscore this optimism.

Forecasts indicate that Amazon's earnings might hit nearly $5 per share by fiscal 2024. Applying this prediction to the company's forward price-to-earnings ratio implies a stock price of $211, hinting at an anticipated growth of 36% in the coming fiscal year.

Considering the strategic cost management and the flourishing cloud division, Amazon stock seems to be an attractive proposition in 2024.

Amazon, stock, investment