Amazon Stock just set a new all-time high. Here’s why I always buy.

Some investors are understandably concerned about buying stocks as they reach all-time highs. Even if it seems like a stock is vulnerable to a decline to these levels, it’s best to look at the bigger picture. Over the long term, if it is a quality company, the stock should continue to increase in value.

Amazon (NASDAQ:AMZN) recently reached a new all-time high in early May, but has since retreated a few percentage points. Still, I think Amazon stock is a great buy right now. Here’s why.

Its activities are all incredibly successful

Amazon has been firing on all cylinders as a business. It divides its activities into three divisions: North America, International and Amazon Web Services (AWS). In previous quarters, at least one of its three main segments was not doing well, but that is no longer the case.

Amazon’s e-commerce side, which is divided by geography, is much larger than its online store. It also includes fast-growing segments such as third-party seller services, advertising services, and subscription services. In fact, Amazon’s online store segment only grew 7% year over year across all regions. However, these other segments helped North American and international sales increase by 12% and 10%, respectively.

While this was respectable growth, the profits from these divisions were outliers. The North American segment generated operating profit of nearly $5 billion (up 455% year-over-year) and the international segment achieved its first operating profit ($903 million). dollars) since the second quarter of 2021.

This proves that Amazon’s focus on efficiency continues to have a massive effect and will generate higher profits throughout 2024 if they stay on their current trajectory. If Amazon’s trajectory continues, 2024 will be an exciting year on the business side of the company.

AWS is back in growth mode after a difficult 2023

While the commercial side of the business generates the bulk of the revenue, the AWS cloud computing business generates the profits. In 2023, AWS struggled as its customers focused on optimizing their spending. According to management, this trend is largely over and new workloads far outweigh declining ones.

In the first quarter, AWS revenue increased 17% to $25 million, the highest total revenue I have seenn the cloud computing industry. This growth rate is the fastest since the fourth quarter of 2022. Revenues also increasing drastically increase in AWS operating profitwhich grew 84% to $9.4 billion.

These numbers clearly show why Amazon is hitting new all-time highs. Revenue is up double digits and operating profit is also growing incredibly quickly. This combines that the stock should reach record highs if this success continues into the second quarter and beyond.

Amazon shares trade at a premium

However, a downside may be the valuation of the shares. Amazon is trading at a high valuation if you use the forward price-to-earnings (P/E) ratio.

AMZN PE Ratio Chart (Forward)

Amazon’s stock is difficult to value as its profits are growing rapidly due to…

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