Amazon (AMZN +0.55%) has been one of the stock market's top success stories of all time, but past performance is no guarantee of future results, as they say.
In some ways, Amazon is the same spritely, innovative growth company it's been from the get-go. In other ways, it has naturally changed as it has expanded, and it's operating in a different point in time.
Let's see what's doing today and what to expect, and determine whether or not it makes sense to buy Amazon stock now.
The bull case: Amazon is as dominant as ever
Amazon is by far the largest e-commerce player in the U.S. with 38% of the market, according to Statista. No matter how many companies have embraced e-commerce, the normalization of it benefits Amazon more than any other company.
The number of Prime memberships continues to grow, and these members rely on Amazon for a huge percentage of their basic needs. The company is improving its delivery services with faster speeds and a broader selection to maintain and grow its lead. Recently, it reconfigured its delivery network from a national system to a regional one, which gets more products to more customers faster.
It's beefing up its cloud business, Amazon Web Services (AWS), as well with game-changing generative artificial intelligence (AI) solutions like CodeWhisperer, which allows developers to give prompts to write code instead of writing code themselves. That gives them more time and freedom to pursue more-creative endeavors.
AWS is still posting higher growth overall than the total company, with a 12% sales increase over last year in the 2023 second quarter as compared with 11% for Amazon, and it accounts for most of the company's operating income.
NASDAQ: AMZN
Key Data Points
The company has made several acquisitions over the past few years that bolster its competitiveness in several areas. It acquired MGM Studios last year to beef up its Prime streaming, and it became the recipient of a massive content library.
It also took new steps into healthcare with the acquisition of One Medical, and for now, it's taking this project slowly. But this could develop into a huge segment with lots of growth opportunity in what is the largest part of the economy.
Beyond that, Amazon has a stake in many smaller businesses. This segment is its fastest growing, and it could be an incubator of new growth generators that turn into huge revenue drivers. A recent development is its partnership with Shopify to allow customers to buy with Prime in Shopify merchant stores.
The bear case: Growth is slowing down
Amazon is the second-largest U.S. company by sales with $538 billion in trailing-12-month revenue. Large companies are harder to steer and grow revenue. Growth has decelerated from highs in the pandemic, but it's even slower than it was pre-pandemic.
There's a lot of new competition out there as well. While AWS is still strong, it's actually losing market share in cloud computing to Microsoft Azure, Alphabet's Google Cloud, and smaller companies. It accounted for 34% of the market last year and is now down to 32%.
Management said it's working on offering better services to maintain its top position and attract new clients even as existing AWS clients cut their budgets. There are different reasons why loss in market share could be happening right now, and while some of it might indicate trouble for Amazon ahead, the more likely reasons are that it has many clients, and they're feeling the effects of inflation. It's still way ahead of any other provider.
Verdict: Don't count Amazon out yet
Amazon is primed (pun intended) to keep growing in so many areas. It probably won't deliver the same gains that it did when it was a start-up, but its story is far from over.
Amazon stock is still down 18% over the past three years. But it's up 61% in 2023, and now is an excellent time to buy in as it continues climbing.
