Amazon (AMZN 1.30%) has become a favorite on Wall Street in 2023, with its stock up over 60%. The growth starkly contrasts with the nearly 50% plunge its shares fell last year amid macroeconomic headwinds. The company rallied investors in recent months with a strong recovery in its retail business and a gradually expanding position in artificial intelligence (AI).
Easing inflation and countless restructuring moves seem to have Amazon on a growth path. As a result, it's an excellent time to learn more about this tech giant and potentially invest in its stock. With shares that have soared 830% over the last decade, it could make a lucrative long-term hold.
So, here are three things about Amazon that smart investors know.
1. The longest growth streak in 20 years
Amazon has been on a roll this year, with consistent gains across its business. After suffering significant profit declines in its e-commerce division in 2022, the company reported operating income of over $3 billion in its North American segment in the second quarter of 2023. The figure represents a massive improvement from the $627 million in losses it experienced in the year-ago period.
Restructuring decisions such as closing dozens of warehouses, shuttering unprofitable projects, and laying off thousands have proved the company's resilience amid unfavorable conditions. Its steady recovery over the last year highlights the company as a reliable investment, able to bounce back no matter the short-term challenges.
As Amazon's retail business has enjoyed a correction, a growing expansion into AI has further rallied investors. The company's stock climbed 64% since the start of the year, with its 3% growth in August being the sixth consecutive month of gains. The rise is Amazon's longest growth streak in the last 20 years and has shown little sign of slowing down.
2. A second Prime Day announced
Amazon has held Prime Day every year since 2015, an event that strives to attract new subscribers with enticingly low prices over a 48-hour period. The latest Prime Day took place in July, with the company describing it as its "biggest ever."
According to Adobe Analytics, this year's Prime Day bolstered U.S. online sales by about 6% and hit nearly $13 billion. Amazon said it sold 375 million products worldwide, boosting its guidance for Q3 2023.
The success has motivated the company to announce a second Prime Day set for this October in the run-up to the holiday season. Other retailers and analysts have been bracing for a lukewarm holiday season, expecting shoppers to cut back on spending amid inflation hikes. However, with shoppers increasingly searching for discounts, Amazon could massively profit from a second Prime Day in the fourth quarter.
3. Growing support from Wall Street
Stellar growth in retail and a developing position in AI made Amazon's stock an increasingly compelling investment, and Wall Street seems to agree. The company's average 12-month price target of $168 per share is 22% higher than its current position. Meanwhile, 49 out of 53 analysts have rated Amazon's stock a buy/strong buy.
Excitement for the company's potential is not unfounded, as it leads two high-growth industries while simultaneously profiting from easing inflation. Amazon holds the largest market shares in e-commerce and cloud computing, granting it a lucrative position in tech. Online retail sales made up about 19% of all purchases in 2022, rising from just 7% in 2015. That figure is expected to hit 23% by 2027, with Amazon well equipped to profit significantly from that growth.
Moreover, the cloud market is projected to receive a massive boost from AI in the coming years as more companies seek tools to enhance their businesses with the technology. Amazon has responded to soaring demand by adding several new AI tools to its cloud platform, Amazon Web Services (AWS), and venturing into chip development.
Amazon stumbled last year, but its solid outlook over the long term makes its stock a screaming buy right now.
