Amazon (AMZN +0.53%) has been a multibagger stock over time, multiplying in value and rewarding the long-term investor. Most of the big gains have come over the past decade, as the company's Prime subscription service and cloud computing unit Amazon Web Services (AWS) saw growth take off.
And at the same time, in very recent years, the artificial intelligence (AI) boom has offered another key catalyst for stock price performance. This is as Amazon uses AI to improve its business and sells AI tools to customers through AWS.
Now, you might wonder whether this e-commerce and cloud giant, after seeing its stock climb 800% over the past decade, still has room to run. I think it does, thanks to its leadership in those businesses, efforts it's made to favor profitability, and the overall outlook for the AI market. In fact, my prediction is Amazon will be a millionaire-maker stock. Let's find out more.
Image source: Getty Images.
An e-commerce and cloud powerhouse
So, first, let's take a look at the Amazon story so far.
I probably don't have to tell you that Amazon is a powerhouse in the e-commerce space, selling everything from grocery to mass merchandise at prices shoppers like. The company's Prime program has been a key driver of growth as subscribers return to Amazon as often as possible to truly benefit from the membership -- today, Prime has more than 200 million members, and events like Prime Day, generally held twice a year, have helped grow membership numbers.
Meanwhile, AWS, as the world's biggest cloud services provider, drives profit at Amazon. In the recent quarter, the company reported a 17% increase in revenue for the unit -- and AWS now has reached a $123 billion annual revenue run rate.
All of this has resulted in double-digit sales growth for Amazon and billions of dollars in revenue and profit. The market giant also has increased return on invested capital (ROIC) over the years, showing its ability to make smart investing decisions and benefit from them down the road.
AMZN Revenue (Annual) data by YCharts
Amazon's turnaround
Now, you might notice a drop in ROIC and net income a few years ago in the chart. And that leads me to one reason why Amazon may excel in the years to come.
Back in 2022, Amazon struggled with higher interest rates and even reported a net loss for the year -- but it used this as an opportunity to revamp its cost structure, a move that brought it back to profitability a year later and positioned it for long-term success.
Amazon continues to work on this, for example, reorganizing its fulfillment network to reduce cost to serve -- as it further develops these efforts, investors should see the results in the company's earnings reports.
At the same time, Amazon is winning in two ways during this AI revolution. The company is applying AI to its business to increase efficiency and lower costs -- for instance, AI tools help Amazon find the fastest delivery routes for packages. This improved service should please customers, encouraging them to come back, and favor higher earnings over time.
And, as I briefly mentioned, AWS offers AI products and services to its customers, which has supercharged the unit's growth in recent times. This momentum is far from over, as companies are just getting started when it comes to actually applying AI to their businesses. And AWS, as a cloud leader, has the opportunity to reach a great number of potential AI customers.
NASDAQ: AMZN
Key Data Points
A reasonable valuation
At the same time, Amazon stock trades for 35x forward earnings estimates, down from more than 42x last year. This valuation is very reasonable and offers the stock room to run. It's also important to note that this metric reflects earnings prospects for the coming year, but doesn't take into account earnings potential a few years down the road.
So, now let's return to my prediction: Considering the points above, Amazon will be a millionaire-maker stock -- it's done it before, turning $50,000 invested 15 years ago into more than $1 million today. But it's important to keep in mind that $50,000 is a big sum for most investors, meaning putting it all into one stock -- even a solid player like Amazon -- is very risky.
This doesn't mean you have to give up on your million-dollar dreams, though. Instead, regardless of the size of your investment budget, distribute this money across a range of quality companies according to your investment strategy -- you may favor growth companies, or you might favor value or dividend stocks, for example.
And if you include Amazon in the portfolio, my prediction is this top tech stock may help you reach millionaire status several years down the road.
