Amazon has grown from an online bookseller to a leading company in various markets with the potential for another $100 billion opportunity. The company is already generating over $300 billion in net sales annually through its core ecommerce business, with its AWS platform generating over $100 billion in the first quarter. Advertising is a $50 billion business for Amazon, and its Amazon Prime subscription service, combined with other subscription services, adds an additional $40 billion in revenue.
To pursue another significant business opportunity, Amazon needs something big and with the potential to reach $100 billion in revenue. Leveraging its large investments, Amazon has rapidly expanded its fulfillment network, positioned itself to offer more logistics and shipping operations for packages outside of Amazon, and launched Buy with Prime and Supply Chain by Amazon.
According to Truist analyst Youssef Squali, shipping and distribution could potentially grow to become a $100 billion revenue generator for Amazon. CEO Andy Jassy sees this as an opportunity to capitalize on existing capacity and systems without requiring significant capital investments. If Amazon’s logistics segment takes off, it could significantly boost results and free cash flow.
Amazon’s logistics business could position the company to potentially surpass UPS and FedEx, with the ability to ship even more packages. This could be a significant driver for Amazon’s stock price in the future, as it would represent a major growth opportunity for the company. At its current price, Amazon stock still appears attractive, with an enterprise value to sales ratio of about 3 and trading at 42.5 times free cash flow.
Investors considering buying shares in Amazon should take note of the potential growth in the logistics business, as it could be a catalyst for driving the stock higher. The Motley Fool’s Stock Advisor service has identified 10 other stocks that could produce significant returns in the coming years, highlighting the importance of diversification. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool has positions in and recommends Amazon and FedEx, as well as recommending United Parcel Service.
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