It’s been a bumper year for Amazon.com Inc. (NASDAQ:AMZN) so far in 2018. If you added Amazon stock to your portfolio back in January, you’ve seen your shares appreciate by more than 40%. That’s impressive considering the firm share price was well above $1000 to begin with.

However, with the company’s market cap making its way toward $1 trillion, many are beginning to question how the ecommerce company will fuel that kind of mega-growth. In fact, Amazon has become a short-seller favorite as investors bet on the company’s fall from grace in the coming months.

Yes, Amazon’s rising market cap makes it much riskier than it was, say 12 months ago. However, the company has been able to back up its sky-high valuation with impressive financials and promising future growth potential. I’ll be the first to admit that Amazon’s meteoric rise has me a little nervous, but you can’t argue with the firm’s upcoming growth catalysts.

Grocery

Everyone has had a close eye on Amazon and Whole Foods over the past year as the company worked to make its acquisition a worthwhile investment. So far, Amazon has been successful in upping store traffic at Whole Foods locations by offering Prime members exclusive discounts and cash-back rewards for Amazon credit card users.

However, where Whole Foods will really come into play for Amazon is online food orders.

Amazon is still testing its free delivery and free click and collect options in select markets, but the company is expected to roll those kinds of services out to members across the country, and eventually internationally, in the coming months. That should do two things for Amazon stock.

First, a successful transition into online grocery would add to Amazon’s already compelling Prime ecosystem. The more Amazon adds to the table, the less likely its subscribers are to give up their memberships.

Second, it gives Amazon a new revenue stream that it can build out over time. While its grocery business makes up just a small percentage of the company right now, Amazon will be able to build that out using existing Prime members.

Advertising

Perhaps the most exciting aspect of Amazon stock’s long-term potential from an investment standpoint is the company’s foray into advertising. Amazon is already a leader when it comes to product searches, but the company looks likely to build beyond that to compete with the likes of Alphabet (NASDAQ:GOOGL) and Facebook (NASDAQ:FB).

Last quarter, Amazon revealed that its revenue category simply titled “other” was made up largely of advertising revenue, a figure that grew 132% in just a year. 

Over the past year we’ve seen Amazon push into video advertising using Thursday Night Football and the streaming platform Twitch. What’s great about Amazon adding advertising to its resume is the fact that it’s such a high-margin business. While Amazon has earned its title as king of retail, becoming a force in the advertising industry would be a much more profitable business.

Streaming

Hand-in-hand with Amazon’s advertising business is its streaming platform, where the firm can potentially sell a ton of ad space. Amazon has already proven successful in building out a streaming service that people respond to, but the firm is taking it a step further with an ad-supported channel that will allow people to watch for free.

This approach is similar to what Roku (NASDAQ:ROKU) did with its own Roku Channel, only Amazon has the financial backing and clout to take such a channel to a whole new level.

Roku, for example, uses a revenue sharing model in order to get content rights for its free viewing channel. Amazon could take a similar approach but it’s massive data bank makes its ad targeting much more effective, and therefore lucrative. That will be a big selling point for Amazon when reaching out to content creators.

Roku has been successful with it’s free viewing channel and if Amazon follows suit, I think we’re likely to see the ecommerce giant create something even more valuable.

The Bottom Line on Amazon Stock

Amazon stock has been a winner for years, and although the company’s meteoric rise makes it risky to buy in now- the firm appears to have a solid growth trajectory in front of it.

In the medium term, Amazon’s cloud computing business and grocery project should help deliver strong growth, while in the further future the company looks poised to become a huge advertising presence. 

As of this writing, Laura Hoy was long AMZN and FB