Where will Amazon stock be in three years?

Over the past 20 years, Amazon‘S (AMZN 7.87%) The stock soared a whopping 6,200%, increasing $1,000 to more than $63,000 during that period. This great tech giant has become so successful that it is now one of the most valuable companies on the planet, currently worth over $1.6 trillion.

Past performance is in no way indicative of future returns. Considering Amazon’s sheer size, this may be even more accurate. However, the business still has many positive factors working in its favor, which may be of interest to today’s investors.

Where is this? FAANG stocks In three years? The answer may surprise you.

Various growth engines

In 2024, it will have net sales of $574.8 billion, second only to walmart In the US, Amazon doesn’t appear to be slowing down anytime soon. In fact, the company is benefiting from several secular tailwinds.

Of course, everyone knows about e-commerce. Amazon pioneered online shopping and has been a leader for nearly 30 years. In the United States, Amazon accounts for nearly 40% of all e-commerce spending. Since in-person shopping still accounts for approximately 84% of total retail spending in the country, there is still significant room left to play.

With Amazon Prime Video, the business has a strong presence in the streaming industry. Prime Video is the second most popular streaming service after YouTube, according to data from Nielsen. netflix. The cord-cutting trend will only continue as we look ahead.

Streaming should also meet Amazon’s digital advertising ambitions. Prime Video will now start showing ads on its platform, which will increase its revenue. SSome people may be surprised to learn that Amazon generated $46.9 billion in advertising revenue in 2023. This has proven to be a more significant revenue driver.

Artificial Intelligence and Cloud

One growth engine not mentioned above is Amazon Web Services (AWS), a leading cloud infrastructure provider that controls approximately one-third of the global market. In the future, AWS is likely to become even more important to your overall business.

AWS reported revenue of $24.2 billion in the fourth quarter of 2023, up 13% year over year and faster than posted in the third quarter. Investors were especially concerned about slowing profits while rivals like the company grew. microsoft With Azure alphabetof Google Cloud was growing at a faster rate. So it’s encouraging to see AWS revenues starting to recover.

When it comes to profitability, the cloud makes a big financial difference. AWS reported excellent performance. operating profit margin It stood at 29.8% in the last three months of 2024, indicating just how lucrative an expanded software business can be. As the segment continues to grow, Amazon’s overall profitability will improve.

Grand View Research predicts that the cloud market will be worth nearly $1.6 trillion by 2030, which would allow Amazon to penetrate another huge end market. Even if your business is already huge, it’s easy to see where growth is coming from.

AWS also makes Amazon the industry leader. A.I (AI) Revolution. As more companies shift their IT spending from on-premises to off-premises, services like AWS become their backbone. This means a variety of AI products, including: radical With CodeGuru for generative AI applications, CodeGuru for improving code quality, and Kendra for intelligent search, AWS will become a mission-critical platform for customers.

Rewarding Shareholders

There are many reasons to like Amazon’s business. But before you can figure out what the stock can do over the next three years, you need to understand its valuation.

Amazon stock has surged 55% in the past 12 months. Despite this powerful performance, the price is reasonable. The current price-to-sales multiple of 3 is still below Amazon’s 10-year historical average. This seems like a good entry point for the stock to continue beating the market going forward.