Amazon (NASDAQ:AMZN) stock is now worth over $2 trillion, but companies worth buying into never rest on their laurels. Once a milestone is reached, the great ones seek a new one.
While Amazon was struggling toward its latest milestone, remember, Nvidia (NASDAQ:NVDA) blew past it. It’s now just the fourth most-valuable company in the market.
It’s also getting cheaper. Shares now trade at 3.3 times sales and 53 times earnings. When it passed $1 trillion, in 2018, it was more expensive by these measures.
But a simple Strengths, Weaknesses, Opportunities and Threats analysis is almost impossible. There are too many moving pieces. You must look at each one individually.
AWS and AMZN Stock
Amazon Web Services, the Amazon Cloud, is its Atlanta. It influences everything. AWS is now a $100 billion business, but it’s being pressed hard by Microsoft (NASDAQ:MSFT).
That’s why Adam Selipsky was replaced as AWS President last month with Matt Garman. Garman immediately showed off a new set of lieutenants aimed at improving customer relations, and doubled incentives for startups to build AI on AWS.
Going forward, it’s all about operations. How AWS will deal with the energy requirements of Nvidia chips is important. But so is Amazon silicon, which can take some of the load off those chips and keep costs low.
Software is also key. Amazon Bedrock is the new service that will be streaming Generative AI applications. Amazon put $4 billion into Anthropic, to use its large language models. The latest model is already online.
Then there’s Alexa. Chatbots are suddenly sexy, with Apple (NASDAQ:AAPL) moving to make Siri the glue holding its own AI play together. Despite selling over 500 million Alexa devices, the service is now a laggard.
Changing that may mean charging for it, as much as $10 per month. Making the expense worth it is vital, but Alexa has gotten too big to kill.
Health and The Store
Amazon still gets the bulk of its operating cash flow from its store, a virtual Walmart (NYSE:WMT) with scaled operations to match.
Amazon is now preparing for its July 16 “Prime Day” event, a summer sale that in previous years was heavy with electronics.
All is not well on the merchandising side. Temu and Shein are pressing it in fast fashion as hard as Microsoft is in cloud services. The response is to ship Chinese-made fashion goods more directly, bypassing the normal warehouse distribution system.
While Amazon is on defense when it comes to clothes, it’s on offense when it comes to health. The collapse of Walgreens (NYSE:WBA) represents an opportunity, as do growing “health deserts.”
The answer is to rebrand the Amazon Clinic online service as One Medical, offering $49 per visit telehealth appointments or a subscription plan at $199/year, half that for Prime members.
Amazon bought One Medical last year for $3.9 billion and brought in Trent Green from Legacy Health, a hospital system in the Pacific Northwest, to run it.
All this is on top of Amazon Pharmacy, now pitched as a portal for managing chronic conditions that take up 75% of Americans’ health bills.
The Bottom Line
Analysts who do SWOT analyses see Amazon earning $4.24 per share this year on sales of $596 billion. Amazon next reports July 24 and makes a habit out of beating estimates. The latest one-year price target from Wells Fargo (NYSE:WFC) is $239, a 20% gain.
AMZN stock bulls must remember that value is vulnerable. In tech’s last bear market, just two years ago, Amazon lost $1 trillion in value. But it has since gained all that back, and more.
Amazon is a stock you own, not one you trade.
As of this writing, Dana Blankenhorn had a LONG position in MSFT, AMZN, NVDA and AAPL. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
