Can Mega-Cap Stock Amazon Repeat 2023's Gains in 2024?

The positive momentum in Amazon business has continued into 2024, as evidenced by the sustained upward trend in their share prices. Amazon's stock appreciated by close to 50% during the same period.

For the most part of June 2024, we are seeing Amazon trading above the 50 and 200 day period strongly, and there should be more upside with Amazon planning to create a new shopping section linking buyers directly to cheaper items in Chinese warehouses. This new online catalog will feature unbranded fashion, home goods, and other items, aiming to compete with platforms like Temu (PDD) and Shein. The discount section is expected to start accepting inventory by this fall.

In this article I would like to share some factors that I have assess to gain insights into what the future holds for Amazon stocks in 2024, and determine whether they can stage a repeat of the remarkable gains Amazon delivered in 2023.

Internet commerce and cloud computing giant Amazon delivered revenue of $574.8 billion in 2023, up 12% year-over-year. Its operating income tripled year-over-year to $36.9 billion. Further, its free cash flow improved to an inflow of $36.8 billion for the trailing twelve months, compared with an outflow of $11.6 billion in the prior year.

Amazon's forecast earnings growth (21.4% per year) is above the savings rate (2.4%). Amazon's earnings (21.4% per year) are forecast to grow faster than the US market (14.8% per year).

Amazon's earnings are expected to grow significantly over the next 3 years. Amazon's revenue (9.8% per year) is forecast to grow faster than the US market (8.6% per year).

Amazon successfully reduced the cost-to-serve of its stores, enhanced delivery speed, and expanded its retail offerings by introducing tens of millions of new items to its platform. Furthermore, it experienced growth in the advertising and cloud business (AWS). The company’s operating margin saw substantial improvement, attributed to its transition from a single national fulfillment network to a regionalized model, which reduced delivery distances and associated costs.

These positive developments significantly bolstered Amazon’s share price.

Amazon CEO in 2024 has reaffirmed their commitment to further lower its cost and focus on faster delivery, which will likely significantly boost its retail sales and margins.

Besides retail sales, Amazon’s advertising revenue continues to grow rapidly, emerging as a key growth catalyst. The latest earnings we saw that in 30 April, Amazon Q1 Ad revenue reported 24% growth. This has align with the advertising services revenue which jumped over 24% in 2023, benefitting from sponsored ads.

AWS business reported on 30 April jumping 17% to $25 billion, which is impressive. To capitalize on increasing demand, Amazon has expanded its offerings to include sponsored TV and is further enhancing its services by integrating machine learning technologies.

That is higher than Amazon’s AWS business which registered about 13% growth in 2023 and could cross $100 billion in annualized revenue in 2024. Acceleration in large deals, a strong customer pipeline, integration of AI in its offerings, and ongoing cloud migration will likely support the segment’s growth.

I feel that Amazon is well-positioned to deliver stellar growth in 2024 and benefit from its AI-led initiatives, which will likely support the uptrend in its share price and enable it to deliver above-average returns.

This is also reflected in analysts’ optimistic outlook on AMZN. Out of the 42 analysts covering Amazon offering 12 month price targets for Amazon in the last 3 months. The average price target is $221.55 with a high forecast of $246.00 and a low forecast of $200.00.

Amazon might replicate its 2023 performance. The stock's average price target is $221.55, which implies about 14.43% growth potential from current levels ($193.61).

If we looked at how Amazon’s progress in their cost cutting effort as well as initiative to increase offerings, I would say that they are on the right path, with their ad revenue and AWS business set to grow more in rest of 2024.

I personally would think that Amazon is on path to repeat the 2023 gains for 2024

Appreciate if you could share your thoughts in the comment section whether you think Amazon can repeat the 2023 gains for 2024?

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.