Why reinvent the wheel? That appears to be Amazon's (AMZN 2.50%) philosophy with its current efforts to further expand.

Amazon achieved massive success with Amazon Web Services (AWS) by leveraging its existing technology infrastructure to serve external customers. Now the company is copying its cloud strategy in another big market.

Is Amazon stock a screaming buy with its latest move?

An Amazon delivery person placing a package on a porch.

Image source: Amazon.

Supplying the supply chain

Seventeen years ago, Amazon launched Fulfillment by Amazon (FBA). With this service, Amazon fulfilled its selling partners' orders by picking, packing, and shipping their products directly to end customers. 

FBA has been great for Amazon's partners by offloading an often-challenging function. It has also been financially advantageous for many: Amazon says that FBA is on average 70% less costly than other fulfillment services.

But the service has also been good for Amazon. It's able to offer a lot more products on Prime than it otherwise could.

Last week, Amazon rolled out its next major step in helping its partners with their supply chain processes: Supply Chain by Amazon. While FBA took care of order fulfillment, Supply Chain by Amazon will help sellers throughout the entire supply chain process.

Amazon will pick up products from manufacturing facilities across the world. It will handle shipping those products and take care of all customs issues. It will store products. And it will deliver the products to customers. 

One obvious benefit to Amazon's selling partners is that they'll be able to focus more on their core business. Supply Chain by Amazon should also reduce the time in getting products to customers and reduce sellers' costs. As for Amazon, the company will further solidify its leadership in yet another growing market.

"Replicating the AWS playbook"

Amazon built an impressive cloud computing platform to support its internal needs years ago. The company realized that other organizations could benefit from its cloud infrastructure as well, giving birth to AWS. In the first half of 2023, AWS generated revenue of $43.5 billion and around 84% of Amazon's total operating income.

Wedbush's analysts wrote in a note to clients, "Amazon is replicating the AWS playbook by broadening the availability of its fulfillment network." They stated that Supply Chain by Amazon is "another example of Amazon's ongoing platform democratization, enabling monetization of incremental eCommerce and retail transactions by leveraging existing infrastructure."

Can following the AWS playbook make Supply Chain by Amazon another huge success story for Amazon? Maybe so. Wedbush believes that the new service could become another significant growth driver for Amazon.

However, supply chain management won't present as big of an opportunity for Amazon as cloud services. Gartner estimates the global supply chain management market topped $20 billion in 2022. That's only a fraction of the size of the $569 billion global cloud computing market.

A screaming buy?

Wedbush thinks that Amazon stock has plenty of room to run. Last week, the firm reiterated its "outperform" rating on Amazon, with a 12-month price target reflecting upside potential of more than 30%.

Most of Wall Street appears to be on the same page. Of the 47 analysts surveyed by Refinitiv in September, 15 recommend Amazon as a "strong buy," and 28 recommend buying the stock. The average analysts' price target is nearly 25% higher than Amazon's current share price.

I also like Amazon -- but not just because of its latest move in the supply chain market. AWS will almost certainly continue to be the company's main growth engine. The rising adoption of generative AI should provide a massive tailwind for AWS that goes on for years to come. I also expect Amazon's renewed focus on profitability to pay off with improving quarterly results.

So is the stock a screaming buy? I think so.