The bull market on Wall Street continues to surge as it enters its third year, with the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite reaching record heights. One of the key drivers behind this remarkable performance is the recent advancements in artificial intelligence (AI). Amazon, a company that has been utilizing earlier forms of AI for decades, has capitalized on this technology, leveraging its dominant positions in cloud computing, digital retail, and digital advertising. As a result, Amazon has emerged as a quadruple threat in the tech industry.
The economic recovery, marked by a robust rebound and fading inflation, has further propelled Amazon’s growth. In the third quarter, the company reported an 11% year-over-year increase in revenue, amounting to $159 billion, while diluted earnings per share (EPS) jumped by an impressive 52%. Each of Amazon’s major operating segments contributed to these positive results, with online retail sales in North America rising by 9% and international sales climbing by 12%. Additionally, Amazon Web Services (AWS), the company’s cloud infrastructure service, experienced its highest rate of growth since late 2022, surging by 19%. Furthermore, Amazon’s digital advertising segment, one of its fastest-growing businesses, increased by 19%.
Amazon’s dominance in the online retail sector is unparalleled. The company captured 38% of U.S. e-commerce sales in 2023, surpassing its 15 largest competitors combined. This leadership is expected to continue, with Amazon projected to account for 40% of online sales in the U.S. in 2024. Moreover, Amazon’s AWS is the undisputed leader in cloud computing, capturing 33% of the market share in the second quarter, outpacing Microsoft Azure and Alphabet’s Google Cloud. During the company’s recent earnings call, CEO Andy Jassy highlighted Amazon’s significant progress in AI, releasing nearly twice as many machine learning and generative AI features as other leading cloud providers combined.
In addition to its success in online retail and cloud computing, Amazon has made significant strides in digital advertising. Through various platforms such as Prime Video, Freevee, Amazon Music, and Twitch, the company has expanded its reach and effectively utilized AI to target its ads. This has propelled advertising to become one of Amazon’s fastest-growing businesses.
Wall Street remains overwhelmingly bullish on Amazon, with 95% of analysts rating the stock as a buy or strong buy. Following the company’s robust third-quarter results, J.P. Morgan analyst Nicolas Jones maintained an outperform rating and assigned a Street-high price target of $285, representing a 36% upside compared to the stock’s record-high close. Jones cited Amazon’s dominance in online retail, its gains in digital advertising, and the continued demand for AI, which drives AWS growth.
Investors are also attracted to Amazon’s valuation, with the stock currently trading at approximately 3 times forward sales. This makes it one of the most attractively priced among its peers in the tech industry.