This chart shows classic bunching of the moving averages and subsequent buy signals. Below is a much longer-term chart (each candlestick equals 12 months). On this chart, the latest breakout is arguably even more vivid.
Amazon is a great innovator, made for AI and has the budget, the footprint and the corporate client base to take the fullest advantage.
Amazon has made significant progress in profitability over the last two years, which is a robust achievement. Amazon is well-known for its extremely aggressive R&D approach, which historically weighed on profitability. However, it looks like over the two last years the management has found a balance between innovation and expanding profitability.
Just look at the chart below, there was a big leap in the operating income and the EBITDA. At the same time, innovation remains the core of Amazon’s growth strategy, with a staggering $86 billion TTM R&D spending. [TTM = trailing 12 months]
Seeking Alpha, 25 December 2024 (ed: working hard, even on Christmas day)
Financial success is crucial, but strategic dominance is something even more important when we speak about Amazon. As of today, Amazon remains the world’s undisputed leader in the cloud infrastructure market, with a 31% market share. Competitors are significantly behind, and it is Amazon’s massive competitive advantage in the AI era. It is a golden bullet for Amazon since most AI functionality (model training, deployment, scalability) relies heavily on cloud infrastructure due to unmatched computing power and storage capabilities.
Seeking Alpha, 25 December 2024
Amazon also has a fast-growing advertising business.
Last but not least, Amazon’s digital advertising business. I have not paid much attention to this business line in my previous AMZN articles but with $14.3 billion in Q3 2024 sales I cannot ignore this catalyst anymore. This business is thriving, and its revenue has doubled within just three years.
In absolute terms, Amazon’s advertising business is much lower compared to industry leaders like Google and Meta. But Amazon’s digital ads revenue is growing faster than these two giants, meaning that AMZN is gaining market share at the expense of leaders. I think that having their own vast e-commerce platform positions Amazon uniquely to compete in this industry, which is expected to grow with a 15.3% CAGR by 2030.
Seeking Alpha, 25 December 2024
Lastly, the shares look good value.
As usual, I start my valuation analysis by looking at the expected forward P/E ratio dynamic. The approach is quite simple: the faster this ratio is expected to shrink – the better. AMZN looks very good from this perspective because the 2023 actual P/E ratio of almost 78 is expected to shrink by around three times by fiscal year 2027. Thus, the forward P/E ratio trajectory looks like the stock is very attractively valued.
Seeking Alpha, 25 December 2024
Another Seeking Alpha contributor is arguably even more bullish.
In my last work on Amazon, I stated that I saw a fair value of $325 per-share for Amazon. However, with the e-Commerce segment set to have a very strong quarter in Q4 and investors being optimistic heading into FY 2025, I believe Amazon could even achieve a higher valuation in the next twelve months.
Seeking Alpha, The Asian Investor, 11 December 2024
Share Recommendations (23 January)
Amazon.com. AMZN
QV Alert – Nasdaq 100 Technology Index Poised For Breakout
Quantum Computing Stocks Down But Not Out
Bond Markets Flash Danger Signals
