Investors Overlook Amazon's Billion-Product Milestone in Favor of Services

Amazon recently heralded a triumphant entry into the holiday season, boasting a remarkable sale of 1 billion items during an 11-day period encompassing Black Friday and Cyber Monday. Despite what seems like a positive report, surprisingly, Amazon's stock remained unaffected. This isn't due to a lack of achievement on Amazon’s part, but rather an indication of investor focus shifting elsewhere.

Shift Towards Services

At its core, Amazon may be known for revolutionizing e-commerce, but today investors are seemingly more captivated by the company’s services sector. This segment, which features the cloud computing powerhouse AWS, along with subscriptions and other services, is currently the star, growing by 18% in a recent nine-month span in contrast to just a 4% growth in net product sales. Services now make up 56% of Amazon’s total business, showcasing a strategic pivot in the company’s growth trajectory, especially with the promise of cloud computing.

Stock Performance Context

Despite what might appear as investor indifference to the record-breaking sales announcement, it's essential to note that Amazon's stock performance has been solid, especially when compared to major indexes. With an over 70% increase in 2023 alone, Amazon stands well above the 19% increase of the S&P 500 and has doubled the performance of the Nasdaq Composite Index. The sales milestone, albeit significant, was not sufficient to trigger any additional surge, particularly in the absence of detailed revenue figures accompanying the reported product sales.

Forward-Looking Investors

As 2023 comes to an end, investors are setting their sights on future returns rather than past achievements. The focus is glued to the company's cash flows, profitability, and particularly its gains in the AWS market share. Market analysts and investors alike anticipate that the upcoming quarterly report and updates on consumer spending patterns will provide a clearer financial trajectory as Amazon continues to dominate in the cloud sector.

Amazon, Investors, Ecommerce