Amazon has seen a significant rise in its stock price this year, with a 20% increase so far. However, experts believe that this is just the beginning of a larger movement for the company. There are three key factors that investors should consider when looking at Amazon stock.
Firstly, Amazon Web Services (AWS) is experiencing growth once again. AWS is Amazon’s cloud computing business, allowing customers to rent compute space and run workloads in the cloud. The demand for AWS has been increasing, especially as companies are adopting AI models to enhance efficiency. Recent investments in generative AI startup Anthropic have provided AWS with new tools, leading to a significant increase in net sales and operating income in the first quarter.
Secondly, Amazon’s cash generation is accelerating, with improved profitability in its North American and International divisions. The company has generated $50.1 billion in free cash flow in the last 12 months, a significant improvement compared to previous years. This increase in cash flow is expected to continue, potentially leading to the initiation of dividends or share buybacks.
Lastly, Amazon remains undervalued based on its price-to-sales ratio. Despite showing strong growth and improvements across its business, Amazon’s valuation is still below its average rating. This indicates that the stock is not overly valued and could present a good buying opportunity.
Overall, experts believe that Amazon is a great buy at the moment due to its growth prospects and strong financial performance. With ongoing transformation within the company, long-term investors are likely to benefit from holding Amazon stock. It is recommended to buy and hold the stock for the long term to capitalize on its potential growth.
It is worth noting that former CEO of Whole Foods Market, John Mackey, who is now part of Amazon, has a position on the company’s board of directors. The Motley Fool also recommends Amazon and has a disclosure policy regarding its recommendations.
Article Source
https://www.fool.com/investing/2024/05/23/3-facts-about-amazon-stock-that-makes-it-a-screami/