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Why, Inc. (AMZN) Stock Still Has Countless Catalysts, Inc. (NASDAQ:AMZN) just keeps going up, and up, and up. In fact, AMZN stock is up 20% already year-to-date, adding over $70 billion to its market capitalization. (By way of comparison, American Express Company (NYSE:AXP) is worth $70 billion.) Over the last year, Amazon stock is up 56%; over the past five years, 369%.

Why, Inc. (AMZN) Stock Still Has Countless Catalysts

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AMZN bears still point to the company’s seemingly inflated earnings multiple, but that’s a short-sighted view of Amazon stock.

The sheer number of initiatives coming out of Amazon at this point creates so many growth opportunities for those earnings. And what seems like the busiest company ever continues to find more ways to add value for AMZN stock owners. Given the company’s success so far, it’s extremely likely that at least some of the new efforts will work. And that should be more than enough to push Amazon stock higher.

So Many Catalysts for AMZN Stock

One of the problems for mega-cap stocks like Amazon is that it becomes incrementally more difficult to grow earnings — if only because it’s near impossible to find growth opportunities that are as valuable, or as large, as those targeted by the company’s original business model.

The best example of this, of course, is Apple Inc. (NASDAQ:AAPL). The iPad or Apple Watch would have been considered huge successes for nearly every other company on Earth. But they have paled in comparison to the importance of the iPhone to AAPL stock.

Amazon appears to be tackling this problem by instead amassing as many smaller opportunities as it can. The list of initiatives coming out of AMZN is seemingly endless. There’s Amazon Restaurants, and Amazon Prints and the Echo home assistant. There’s convenience and grocery stores and Amazon Web Services and Amazon Prime and Amazon Business. The list of companies potentially impacted literally is into the hundreds in number and likely the trillions of dollars in market capitalization at this point.

Everyone from old-line industrial distributor W W Grainger Inc (NYSE:GWW) to GrubHub Inc (NYSE:GRUB) to pretty much every retailer in the world is in Amazon’s sights at this point.

Amazon won’t win all those battles. AWS is a massive success, but there have been failures too. The Fire Phone was a flop. A daily deals initiative ended with AMZN essentially giving LivingSocial to Groupon Inc (NASDAQ:GRPN) for free.

But as long as Amazon keeps extending its reach, there will be new ways for the company to grow its earnings over the long-term. And in the short-term, there will be reasons for investors to stay optimistic toward AMZN stock.

A Busy Week for Amazon

The last few days have shown just how far AMZN’s reach extends — and just how much potential growth is left in Amazon stock. A note from Morgan Stanley estimated the company could generate $5 billion in advertising revenue by next year. An agreement with fuel cell maker Plug Power Inc (NASDAQ:PLUG) drove PLUG shares up 73% last week; AMZN has already created over $60 million in paper profits based on its warrants in PLUG stock.

Amazon earned the rights to stream NFL games on Thursday nights, flexing its muscle to take the deal away from Twitter Inc (NYSE:TWTR). It rolled out Amazon Cash, which allows unbanked customers to add cash to their Amazon accounts. That’s a key effort in targeting developing markets. So is the recent expansion of its Amazon Pantry online grocery business into India, and the purchase in late March of Middle East online retailer

It’s simply an incredible amount of activity for any company in the span of just a few days. Admittedly, I’ve worried in the past whether AMZN will be able to manage all of these efforts. But it’s been so far, so good, for Amazon — and for AMZN stock.

Why Amazon Stock Should Go Higher

Again, not all of these initiatives will work out. But that’s OK. The failure of the Fire Phone hasn’t slowed the run in AMZN stock. And there are two important things to remember about Amazon’s hectic expansion pace.

The first is that — obviously — the new markets and new efforts expand Amazon’s profit potential. The higher the company’s potential earnings growth is, the higher AMZN stock will trade.

But the second point is just as important: The failures aren’t permanent, but the successes are. One thing Amazon and CEO Jeff Bezos haven’t been shy about is admitting failure. The company is not going to throw good money after bad. If an effort fails, it fails — the company will move on.

And that’s important in terms of understanding the current earnings profile. There’s nothing more maddening than an investor claiming that the market is “ignoring the earnings” of AMZN stock just because the earnings multiple is high. The converse is true. Investors understand that Amazon isn’t making as much money right now as it could, because it’s investing for the future. The sheer number of those investments, and the company’s track record so far, suggests success should follow. And so should a higher price for Amazon stock.

As of this writing, Vince Martin did not hold a position in any of the aforementioned securities.

Article printed from InvestorPlace Media,

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