Like other “Magnificent Seven” tech stocks, Amazon (NASDAQ:AMZN) stock experienced a rapid rebound this year, gaining 78.8%. Not buying the shares yet doesn’t mean you’ve missed out.
Thanks to many factors (only one of which has to do with Amazon’s legacy e-commerce segment), there may be room for an outsized level of revenue, earnings, and share price growth next year.
AMZN Stock: Many Growth Catalysts on Tap
In less than thirty years, Amazon has gone from garage startup to the world’s second largest company by revenue. Yet even after this tremendous scaling-up, it’s not as if this behemoth has matured into a slow-growing enterprise.
Vigorous growth remains on the menu, which is good news for AMZN stock investors. Future growth is only partially dependent on Amazon’s retail segment, which remains solid.
Expect two other company segments to drive top line expansion. Amazon’s AWS cloud computing segment continues to flourish, as is digital advertising division. Scott Devitt of Wedbush suggests this segment has ample room to grow, considering the size and future growth of the global digital advertising market.
Regarding continued increases to Amazon’s bottom line, organic growth across all segments is leading to outsized growth in profitability, thanks to operating leverage, plus the company’s efforts to decrease overhead expenses and increase efficiency. Put it all together, and it’s easy to see revenue and earnings growth continuing to meet/beat expectations.
How Shares Could Fare in 2024
At current prices, AMZN stock trades for around 61 times next year’s estimated earnings ($2.52 per share). That’s a rich forward valuation, even among “Magnificent Seven” stocks. Stocks in this category usually trade at a much lower multiple (around 30 to 40 times earnings).
However, make no mistake. Amazon is not likely at risk of experiencing multiple contraction. Taking into account the expected level of earnings growth next year (around 64.7%), plus the increasing chances of lower interest rates next year, AMZN’s current valuation is sustainable.
I wouldn’t count on any multiple expansion taking shape, but even if the stock simply rises in tandem with further earnings growth, this could result in strong returns for shares. Here’s how. Looking ahead to 2025, forecasts for that year call for earnings of $3.64 per share, a 44.4% increase compared to 2024.
Of course, forecasting earnings that far out into the future is more art than science, yet in the coming months, subsequent developments, such as growth re-acceleration for the company’s cloud segment, or the initial monetization of Amazon’s AI-related endeavors, could increase in this forecast. Said forecast could also receive an upward revision.
Still Amazing (and Still a Winner), Feel Free to Buy at Current Prices
Again, I wouldn’t buy AMZN thinking another year of nearly 80% gains is in the cards. A lot suggests a mid-to-high double-digit move higher for the stock is well-within the realm of possibility.
Considering the long growth runways for both AWS and the advertising segment, there’s also potential for shares to deliver outsized gains not just next year, but in the years beyond as well.
The latest macro and company-related developments strongly suggest more positive news, not a new round of bad news, lies ahead for Amazon.
After being negatively affected by surging inflation and rising interest rates in 2022, and after kicking off a recovery starting this year, the coming year stands to be another banner one for the company and the stock.
Still amazing, and still a winner, feel free to buy AMZN stock at current prices.
AMZN stock earns an A rating in Portfolio Grader.
On the date of publication, Louis Navellier had a long position in AMZN. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article.
The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
