The COVID-19 pandemic and 2022's economic downturn have made the last few years challenging for stockholders. The market has gone through extreme fluctuations, with companies like Amazon (AMZN -0.87%) being some of the hardest hit.
The retail giant thrived amid lockdowns in 2021 as homebound consumers opted to buy most things online. However, macroeconomic headwinds the following year brought e-commerce sales crashing down. Despite the setbacks, easing inflation and an expansion in artificial intelligence (AI) appear to have Amazon back on a growth path.
Here's why Amazon is my top growth stock to buy right now.
Expanding in multiple high-growth markets
Amazon shares have risen 8% since the company released its second quarter of 2023 earnings on Aug. 2. Investors have grown increasingly bullish as its e-commerce business recovers and the tech giant pivots its cloud services to AI.
Data from Statista shows the e-commerce industry is projected to hit $4 trillion in 2023 and achieve $6 trillion by 2027. Meanwhile, Amazon holds a leading 38% market share in the sector. The company's dominance in the industry suggests it has the most to gain as online-retail purchases rise over the long term despite a dip in sales last year.
In Q2 2023, Amazon's North American segment hit more than $3 billion in operating income after reporting losses of $627 million the year before. The improvement has come thanks to easing inflation and strategic moves by Amazon, which included scaling back on operational warehouses, shuttering less profitable businesses, and layoffs. The comeback has proven the company's resilience and ability to pivot under economically challenging conditions.
In addition to e-commerce growth, Amazon is making promising moves in AI. The market is projected to develop at a compound annual growth rate of 37% through 2030. Meanwhile, the tech giant swiftly expanded its AI offerings on its cloud platform Amazon Web Services (AWS) this year.
In June, the company unveiled a service called Bedrock, which uses a language model similar to OpenAI's ChatGPT to help clients build chatbots and other generative tools. AWS also recently debuted a code generator called CodeWhisperer. It's meant to make software development more efficient. The new AI-enabled services have attracted thousands of customers, including companies such as Sony, Ryanair, and Sun Life.
Amazon's dominating positions in e-commerce and the cloud market give it massive potential over the long term, making its stock one of the most attractive investments this year.
A bargain buy
Despite a recent rally, Amazon's stock still has a long way to go before surpassing the all-time high it achieved during COVID-19 lockdowns. Its share price was 26% down from July 2021, suggesting significant growth potential.
Meanwhile, the chart below illustrates how some of Amazon's biggest competitors, including Apple, Alphabet, and Microsoft, have experienced far more stock growth since then. If Amazon can continue to deliver e-commerce gains and expand its AI profits, the company could be the best long-term investment among these companies.
Data by YCharts.
Wall Street seems equally optimistic. Amazon's average 12-month price target of $167 is about 21% higher than its current position. Analysts are increasingly confident in Amazon's ability to use its leading cloud-market share to its advantage in AI and eventually outperform companies like Microsoft and Alphabet.
Over the last decade, Amazon's annual revenue gained more than 1,500%, while operating income climbed 590%. In that time, the company achieved dominating positions in retail, cloud computing, video streaming, consumer robotics, and more, which have seen it become the world's fifth most valuable company by market cap.
Recent challenges have wreaked havoc on Amazon's stock. However, its gradual recovery in 2023 and long-term potential in multiple high-growth markets make it one of the best growth stocks to buy right now.
