- Amazon.com Inc. (NDAQ:AMZN) is one of the S&P 500’s Magnificent Seven
- Amazon shares were up more than 85 per cent the past year and have doubled over the past five years
- Amazon’s target price is around US$200, implying an 11 per cent upside
- Financial advisor and senior wealth manager Brianne Gardner believes Amazon Web Services, Amazon’s AI cloud computing, is “gearing up for the next generation”
Founded in 1994 by Jeff Bezos in Bellevue, Washington, Amazon.com Inc. (NASDAQ: AMZN) is one of the Magnificent Seven companies alongside, Nvidia, Alphabet, Apple, Meta, Microsoft and Tesla.
These seven stocks’ Total Return Index advanced 107 per cent in 2023 versus the overall S&P 500 Index at 24 per cent. The stocks make up about 30 per cent of the S&P 500’s total weighting, although they make up just 1.6 per cent of the stocks in the index.
Amazon originally started as an online marketplace for books but gradually expanded its offerings to include a wide range of product categories. It now includes multiple subsidiaries, such as Amazon Web Services that provide cloud computing, Zoox, a self-driving car division, as well as Ring, Twitch and IMDb.
In August 2017, Amazon acquired Whole Foods for US$13.4 billion to increase its market share.
With touch points in websites, mobile apps and media content, Amazon continues to root into several areas of our lives.
Brianne Gardner, senior wealth manager at Velocity Investment Partners and Raymond James Ltd., points out that Amazon is more than an e-commerce giant.
“Over the years it’s become a true kind of technology giant getting involved heavily in cloud computing, AI and other parts of businesses and revenues,” Gardner tells The Market Online.
When asked if she thinks Amazon can retain its position in the Magnificent Seven, Gardner believes Amazon’s segment is growing and Amazon Web Services (AWS), its cloud computing segment of AI, is “gearing up for the next generation.” She adds it’s just 14 per cent of Amazon’s revenue, but it produces almost half of the operating margins and profits of the whole company in the last quarter.
Gardner says Amazon can achieve an amazing performance going forward, pointing out the growth of AWS is in double digits at 13 per cent year-over-year.
“The growth is expected to really be sustained by better access to powerful computer parts and more business from AI services and really strong demand for their core services,” Gardner says.
On the AI side, Gardner says, “They’re estimating a range of $3 billion to over $40 billion (in AI market growth) and Amazon, I believe, is in a good spot because they have that wide range of AI services and is seeing positive trends in how consumers are using and benefiting from those services.”
In terms of now being a good time to “get in,” Gardner says, “We’ve seen Amazon stock up over 85 per cent over the past year and (it’s) more than doubled over the past five years. … Amazon’s growth is sustainable, they have the target of about US$200, which still implies around 11 per cent upside potential from here. And analysts’ target consensus on the street is around US$208.”
Gardner is a go on Amazon.
“I do think that there’s still room to run for the stock and again, a great long-term hold that if the company is consistently beating top and bottom line, it’s a stock that we want to hold in our portfolio for guidance,” she says.
Amazon.com Inc. (NASDAQ: AMZN) stock closed at US$183.32 Tuesday.
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