Amazon’s impressive performance has led to a substantial increase in its shares, with the company recently joining the Dow Jones Industrial Average. As of late June, Amazon is the best-performing stock in the index, making it an attractive option for investors looking to capitalize on growth stocks even at its peak.
The success of Amazon can largely be attributed to its Amazon Web Services (AWS) division, which has emerged as a leader in cloud infrastructure. With a market share of over 50% among the top 10 cloud service providers and a strong year-over-year growth in customer numbers, AWS has been a key driver of Amazon’s overall business growth.
The financial results from the past five years illustrate the significant impact of AWS on Amazon’s revenue and operating income. While the North America and international segments have shown inconsistent performance, AWS has consistently delivered impressive results, leading to a tripling of operating profit in just five years.
Amazon’s approach to reinvesting profits back into the company has led to a shift in how the company is evaluated, moving away from traditional metrics like price-to-earnings ratio towards metrics like price-to-sales ratio and operating income. The company’s operating income and margin have seen significant improvements over the past decade, indicating a strong and high-growth business model.
Analysts foresee further growth for Amazon, with earnings per share expected to increase in the coming years. With a price-to-earnings ratio that is not excessively high, Amazon remains an attractive investment option for those who believe in the company’s long-term prospects.
While Amazon’s stock may currently be at its peak, the company’s solid track record and potential for future growth make it a favorable choice for patient investors. However, it is important to consider the potential risks, such as a slowdown in growth, that could impact Amazon’s performance in the future. Ultimately, Amazon’s success and profitability make it a promising investment option, albeit one that requires careful consideration and monitoring.
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https://www.fool.com/investing/2024/07/06/amazon-buy-stock-best-performing-dow-jones/