It is too late to buy Amazon (NASDAQ:AMZN) stock now? Or, should Amazon’s current shareholders take profits and run?
To both questions, I’m offering a definitive “no.” Even though Amazon’s market capitalization has rapidly expanded in 2023’s first half, this e-commerce bellwether can still grow and develop into new frontiers.
Amazon was a trailblazer in the e-commerce domain; there’s no denying it. As the data will prove, Amazon remains the undisputed heavyweight champion of U.S. e-commerce contenders.
At the same time, Amazon is probing uncharted territory in the internet-satellite space, potentially creating a win-win scenario for the company and millions of customers.
Here’s Why AMZN Stock Isn’t Too Expensive
At first glance, Amazon stock might look grossly overpriced. Sure, it’s been exciting to witness Amazon’s market cap surpass $1.3 trillion. However, the company’s trailing 12-month price-to-earnings ratio of 315x may be difficult for value-focused investors to tolerate.
This suggests that the market expects Amazon’s business to grow rapidly. Yet, there’s data indicating that Amazon can continue to rely on its core e-commerce business as a powerful revenue generator.
Citi analyst Ronald Josey observed “relatively positive results coming in from Amazon’s annual Prime Day event this past July 11-12.”
Personally, I think he’s understating Amazon’s outstanding results. Believe it or not, shoppers spent a whopping $12.7 billion on e-commerce purchases, buying over 375 million items during the two-day event.
At last year’s prime event, Amazon’s customers purchased over 300 million items. So, the year-over-year improvement is noticeable. Josey’s assessment is modest, as he is “incrementally confident on Amazon’s e-commerce business.”
Given the aforementioned figures, however, I’m more than just “incrementally” confident.
Amazon Aims for the Skies
My point, so far, is that the lofty Amazon stock price can be justified by the company’s astounding success as an e-commerce business. There’s more to Amazon’s story, though, as the company attempts to conquer new markets.
To see which market Amazon might conquer next, don’t look ahead; look up to the skies. That’s where Amazon plans to send not just one or two, but thousands of Kuiper internet satellites.
This could prove to be a win-win scenario for everyone involved (except maybe Amazon’s competitors).
It’s been said that over 8 million people in the U.S. don’t have high-speed internet access. That’s a huge addressable market that Amazon can serve someday with its Kuiper satellites.
Granted, this story will take some time to play out. According to a Reuters report, Amazon “aims to launch its first mass-produced satellites by early 2024,” and then “deploy half of the network [of satellites] into orbit by 2026.”
Sure, you could wait until they deploy those satellites before taking a position in AMZN stock. By that time, however, Amazon’s market cap will likely be much higher than it is now.
No Need to Wait for a Pullback With Amazon Stock
I fully understand the instinct to wait for a dip before buying Amazon stock, or wanting to take profits if you already own it. After all, Amazon’s valuation looks excessive at first glance.
However, a deeper dive into Amazon’s ultra-successful e-commerce business should change your outlook. Also, Amazon’s venture into satellites and internet connectivity should eventually enhance the company’s value.
So, there’s no need to avoid or sell AMZN stock now. Feel free to hold at least a few Amazon shares in anticipation of continued growth, success and relentless innovation.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
