Amazon Stock: Why This Cash-Rich Titan Is Poised for Continued Greatness


  • Amazon (AMZN) is back on track after stumbling following the pandemic. 
  • Growth is being driven by cloud computing and online advertisements. 
  • A new AI expert on the board of directors should help keep Amazon a step ahead. 
Amazon stock - Amazon Stock: Why This Cash-Rich Titan Is Poised for Continued Greatness

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E-commerce giant Amazon (NASDAQ:AMZN) remains a best-in-class growth stock that continues to deliver big gains to its shareholders. Amazon stock has risen nearly 50% over the past year, including a 25% gain so far in 2024. Cutbacks on spending and right sizing its business after the pandemic have led to renewed growth.

An ongoing push into streaming and the adoption of artificial intelligence should sustain AMZN stock over the long-term. A total of 42 professional analysts currently have a consensus “strong buy” rating on Amazon stock, with a median price target that is nearly 20% higher than where the shares currently trade.

Growth Everywhere for Amazon Stock

Following a difficult year coming out of the Covid-19 crisis, Amazon is back on track and exhibiting growth across all of its lines of business. The company’s financial results for this year’s first quarter showed particularly strong growth in online advertising and cloud computing. Amazon reported Q1 EPS of 98 cents compared to 83 cents that was forecast on Wall Street. Earnings more than tripled from a year earlier.

Revenue in Q1 totaled $143.3 billion versus $142.5 billion that was expected among analysts. Sales were up 13% year over year.

Breaking down the print, Amazon Web Services, the company’s cloud computing unit, recorded $25 billion of revenue, beating estimates of $24.5 billion. AWS accounted for 62% of total operating profits.

Advertising at Amazon racked up revenue of $11.8 billion, up 24% from a year earlier.

Advertising and Cash Surge

The company’s ad business grew faster than retail sales and cloud computing. Following aggressive cost-cutting measures, operating income at Amazon soared more than 200% during this year’s first three months, reaching $15.30 billion.

Amazon’s stock got a nice boost following the latest print, but would have been up more had the company not issued conservative guidance and failed to declare a dividend payment.

Amazon remains the only megacap tech stock that does not pay a distribution to its shareholders. The company had $73.90 billion of cash on hand at the end of the quarter, up 36% from $54.30 billion a year earlier.

Push Into AI

Management at Amazon has made clear that they plan to add AI wherever they can to enhance everything from the online shopping experience of consumers, to streaming content and their dominant position in cloud computing.

The company has announced the addition of AI expert Andrew Ng to its board of directors. Ng previously led AI projects at Google parent company Alphabet (NASDAQ:GOOG;NASDAQ:GOOGL) and China’s Baidu (NASDAQ:BIDU).

Ng is also currently an adjunct professor at Stanford University and runs an AI venture lab. Ng’s appointment comes as the company’s cloud unit faces some pressure from Microsoft’s (NASDAQ:MSFT) competing Azure product.

As the race to develop generative AI assistants and other technologies ratchets up, his guidance should help keep Amazon a step ahead in the global AI race.

Buy Amazon Stock

As a company, Amazon is in a great position. It continues to dominate in e-commerce and cloud computing, and is increasingly competitive in streaming and the global AI race.

Cost controls have enhanced the company’s profitability and bolstered its cash position. And Amazon looks to have a strong tailwind as revenue from online advertising grows. Dividend or not, Amazon stock is a buy.

On the date of publication, Joel Baglole held long positions in GOOGL and MSFT. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.

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