The COVID-19 pandemic caused a boom in e-commerce as millions of homebound consumers shopped almost exclusively online. As a leader in the industry, Amazon's (AMZN 6.19%) stock skyrocketed, reaching a high of $186 in July 2021. However, an economic downturn in 2022 sent the stock tumbling, losing what it had gained the year before. It remains down 26% from its 2021 high despite a recent rally.
Market volatility hasn't made it easy to be an Amazon investor over the last five years. However, glowing earnings results for the second quarter of 2023 and shares that have risen roughly 65% year to date make it an attractive long-term investment. It may be down since 2021, but that only strengthens the argument for its stock as it has plenty of room for growth ahead.
So, here's why Amazon is one growth stock you'll want to buy right now before it's too late.
On a growth streak
In 2022, macroeconomic headwinds proved detrimental to Amazon's e-commerce business. Its North American and international segments experienced combined operating losses of $10.6 billion in the fiscal year after severe reductions in consumer spending. However, easing inflation and numerous restructuring moves have paved the way for a correction this year. Amazon's North American segment returned to profitability in the first quarter of 2023 and hit over $3 billion in operating income in Q2.
As a crucial part of Amazon's business, its retail segments regularly account for about 80% of its total revenue. Consequently, the improvements have triggered a rally for its stock, up roughly 60% year to date. In fact, its rise of 3% in August marked the sixth consecutive month of gains and the longest growth streak for Amazon shares in the last 20 years.
Amazon's business and stock appear to be on the charge right now. Its e-commerce division is making a solid recovery after a challenging 2022. Meanwhile, its cloud platform, Amazon Web Services (AWS), has massive potential in artificial intelligence (AI). The company's stock may be down 26% from its 2021 high, but its prospects in multiple markets could see it blow past that figure within the next year.
Amazon is a company of the future
Alongside stellar growth this year, Amazon's long-term outlook is bright. The company holds leading market shares in online retail and the cloud industry, two high-growth areas.
Data from Statista shows the e-commerce market is projected to hit nearly $4 trillion this year and continue expanding at a compound annual growth rate (CAGR) of 11% through 2027. Meanwhile, Amazon is the biggest name in online retail in multiple countries. The company stumbled amid last year's economic challenges. However, its dominance also positions it to profit most as consumers increasingly turn to their computers and smartphones to shop for essentials.
Amazon called its latest Prime Day this past July its "biggest ever," with the event boosting U.S. online sales by 6% to nearly $13 billion (per Adobe Analytics). Amazon revealed it sold 375 million items during the sale and has planned a second Prime Day for this coming October, which will likely continue to bolster its retail business.
Moreover, the company is making promising headway in AI, an industry expected to grow at a CAGR of 37% through 2030. This year, Amazon has introduced several new AI tools to AWS and announced a venture into chip development, which will diversify its position in the sector. The company will have to contend with companies like Microsoft and Alphabet in the increasingly crowded market. However, AWS' position as the world's largest cloud platform could prove an invaluable asset in the fight against the competition.
Amazon's stock has climbed 833% over the last decade as its retail and cloud businesses have exploded. External factors like the pandemic and an economic downturn have challenged the company in recent years. However, it looks to be back on a growth path. With its shares down 26% since 2021, Amazon is a must-buy growth stock this year.