It hasn't been easy to be an Amazon (AMZN +2.05%) investor in recent years, with its stock soaring to record heights amid COVID-19 lockdowns in 2021 and then crashing back down as it faced macroeconomic headwinds the following year.
The company has delivered an impressive comeback in 2023, with its shares up about 75% since Jan. 1 as its e-commerce business returned to profitability and it rallied Wall Street with a burgeoning artificial intelligence (AI) business.
However, Amazon shares remain down around 20% since July 2021, signaling a buying opportunity. The company has introduced several cost-cutting measures over the last year that have strengthened its business. Meanwhile, it is leading the way in multiple high-growth markets.
So, here's why Amazon is a growth stock worth buying right now.
A solid year of recovery
In 2022, shares in Amazon plunged nearly 50%. Spikes in inflation curbed consumer spending and the company posted operating losses totaling $10.6 billion between its two e-commerce segments for the fiscal year. It remained profitable thanks to its lucrative cloud business with Amazon Web Services (AWS). However, the challenges highlighted some weaknesses in the business that it has worked to rectify in 2023.
Restructuring moves such as closing dozens of warehouses, shuttering unprofitable projects like Amazon Care, and thousands of layoffs massively paid off this year and proved management's ability to accurately respond to headwinds. In the third quarter of 2023, revenue rose 13% year over year, beating analysts' expectations by more than $1 billion.
Meanwhile, its North American segment hit more than $4 billion in operating income, improving on the $412 million in losses it posted in the year-ago quarter.
NASDAQ: AMZN
Key Data Points
For the fourth quarter of 2023, Amazon expects revenue to increase between 7% and 12%, with operating income more than tripling from the same quarter in 2022. The company appears to be back on a growth path and could be an exciting option heading into the new year.
Amazon investors can profit from exposure to multiple markets
Since starting as an online book retailer in 1994, Amazon has expanded to numerous industries across tech. The company has become a household name, serving consumers in online retail, video and music streaming, cloud computing, gaming, robotics, and more.
Amazon has seen immense success with its Prime subscription, which allows access to the bulk of its services and offers the company a steady revenue stream. Data from Statista shows that the program has more than 200 million members globally, encouraging consumer loyalty with the promise of free and fast shipping and premium media content.
Moreover, AWS' leading market share in cloud computing gives the company massive potential in AI, an industry worth $137 billion and projected to have a compound annual growth rate of 37% through 2030. Businesses worldwide are increasingly looking for ways to boost efficiency with the help of AI.
Meanwhile, Amazon is investing heavily in the technology, introducing several new AI tools to AWS this year and announcing a venture into chip development -- two areas of AI where demand is soaring.
In the third quarter, Amazon posted $50 billion in cash and cash equivalents, with $17 billion in free cash flow. The company has a long history of growth and has the funds to continue investing in its business and overcome potential headwinds.
Data by YCharts.
As seen above, Amazon's price-to-sales (P/S) ratio is at one of its lowest points over the last decade and significantly lower than some of its top competitors. The figures indicate that the shares are not too expensive, making it a growth stock worth considering this month.
