For budding investors, a bull market signifies a prolonged period of growth extending over months or even years. It traditionally commences once stock prices surge by 20% from a recent low.
The chart below visually encapsulates the trajectory of the S&P 500, hitting its rock bottom in October 2022, and steadily ascending thereafter, heralding the onset of a bullish market phase.
Data by YCharts
Since October 2022, the S&P 500 has surged by approximately 55%, propelled by diminishing inflation and the onset of artificial intelligence (AI) phenomenon. The index has displayed a robust resurgence and likely has more growth in store. The current earnings season kickstarted this month, demonstrating that tech enterprises are starting to reap substantial benefits from their AI investments.
Given these promising indicators, it’s not too late to capitalize on the flourishing bull market. Amazon (NASDAQ: AMZN) emerges as an enticing prospect, with its stock marginally outperforming the S&P 500 since the inception of the bull market, surging by 57%. The company houses a potent business with growth stimulants resonating across the tech spectrum.
Thus, securing your position while the bull market persists is prudent. Here are three compelling reasons to acquire Amazon stock without hesitation:
1. Revolutionizing Business with AI
AI fervor has skyrocketed since the onset of the past year, compelling numerous tech firms to recalibrate their operational blueprints to prioritize this burgeoning sector. Cloud computing emerged as a pivotal growth niche for AI, motivating many enterprises to leverage the premier cloud platforms to seamlessly embed this technology into their workflows.
Amazon Web Services (AWS) commands a notable 31% market share in cloud computing and has fervently invested in AI. In recent times, Amazon has introduced an array of novel AI tools to AWS, broadening the platform’s reach by channeling billions into inaugurating data centers domestically and internationally. According to a Bloomberg publication in March, Amazon is projected to allocate near $150 billion over the ensuing 15 years towards data centers, anticipating a surge in demand for AI cloud services.
Beyond AWS, Amazon is infusing other dimensions of its business with generative attributes. Earlier in the year, the company rolled out its AI assistant, Rufus, aimed at elevating customer experience on its e-commerce platform. Simultaneously, AI aids in tracking shopping patterns, suggesting products, and optimizing shipping/warehouse logistics.
2. Dominance in Digital Advertising
Amazon’s enduring success can be ascribed to persistent re-investment in its operations, facilitating its expansion into multiple markets. Beyond online retail and AWS, the company has solid footholds in groceries, video streaming, gaming, healthcare, and more. Maintaining a pulse on prevailing tech trends recently steered Amazon to broaden its influence in the $740 billion digital advertising arena.
The exorbitant costs associated with content creation and managing a sophisticated video streaming platform have impelled several firms to struggle in turning a profit. Consequently, numerous entertainment entities have turned to advertisements to bolster their earnings. Netflix, Disney, and Comcast have all ventured into ad-supported tiers within their respective streaming platforms over the past year, collaborating with advertising titans like Alphabet and Microsoft.
Amazon also joined this bandwagon this year, integrating ads into its Prime Video streaming service. This strategic move swiftly bore fruit, diversifying its revenue streams and immersing it in another high-growth sector. Ad revenues surged by 20% in the second quarter of 2024, propelled by Prime Video ads.
Prime Video attained a milestone of over 200 million subscribers this year, capturing a 22% market share in the streaming landscape (on par with Netflix in market presence). Amazon’s extensive user base serves as a formidable magnet for advertisers, enabling it to perpetuate the expansion of its digital ad revenues and potentially command a premium for its services.
3. Amazon’s Stock: A Lucrative Investment Bet
Amazon’s shares have climbed by a remarkable 33% year over year, surpassing the S&P 500’s 28% ascent. The company has enamored investors with stellar earnings upswings, an escalating AI footprint, and surprising progress in digital advertising.
Moreover, the graph below underscores that Amazon’s stock offers an attractive valuation vis-a-vis its growth potential.
Data by YCharts
While Amazon’s price-to-earnings (P/E) ratio may seem high at 42, this number notably remains lower than its 10-year average, a span during which the company’s stock price surged by 958%. Conversely, Amazon’s price-to-sales (P/S) ratio stands at an enticing three, also residing beneath its 10-year average.
Coupled with a promising AI trajectory and a burgeoning ad enterprise, Amazon’s stock emerges as a compelling avenue to leverage the existing bull market.
Is Investing $1,000 in Amazon Right Now a Sound Decision?
Prior to acquiring Amazon shares, contemplate the following:
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