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Is Amazon Stock Still a Buy After Hitting All-Time Highs?

Contents hide
1 Key Points
2 Improving demand visibility
3 Advertising and retail business
4 Should you buy stock in Amazon right now?

Key Points

  • AWS is enjoying robust multiyear revenue visibility.

  • Advertising is also becoming a key profit engine.

  • Amazon’s shares can continue to soar even above their all-time high levels.

  • 10 stocks we like better than Amazon ›

Shares of Amazon (NASDAQ: AMZN) are hovering close to an all-time high of $254.

Amazon Fire Tv with Prime Video on screen in a living room with family.

Image source: Amazon.

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But several growth catalysts can propel Amazon stock above its current price and potentially surpass its all-time high in the coming months.

Improving demand visibility

Amazon’s cloud computing platform, AWS, saw revenues grow 20.2% year over year to $33 billion in the third quarter. The rapid increase in enterprise spending on artificial intelligence (AI) infrastructure has pushed AWS’ backlog to $200 billion, giving it exceptional multiyear revenue visibility.

Amazon’s custom silicon chips, such as Graviton and Trainium, have strengthened AWS’ price-performance advantage relative to hyperscalers, depending heavily on third-party chips. The company also plans to double data center capacity by 2027, which can further reduce costs and attract even larger workloads.

Amazon expects capital investment of $125 billion in 2025, and plans to invest even higher amounts in 2026, primarily to expand its AI infrastructure.

Advertising and retail business

Advertising has become the second most prominent growth engine. Advertising revenues increased 22% year over year to $17.7 billion in the third quarter, driven by the strong performance of its full-funnel advertising portfolio encompassing every stage of the customer purchase journey.

Advertising through Prime Video and live sports capabilities helps build brand awareness at scale, while advertising through sponsored products at the point of sale improves conversion rates. The company’s partnerships with premium content providers, such as Netflix, Spotify, and Sirius XM, enable advertisers to access high-quality ad inventory through Amazon’s demand-side platform (DSP).

See also  <!DOCTYPE html><html lang="en"><head> <meta charset="UTF-8"> <meta http-equiv="X-UA-Compatible" content="IE=edge"> <meta name="viewport" content="width=device-width, initial-scale=1.0"> <title>Exploring Alternative Stars: A Fresh Look at Potential Stock Performers in 2024</title></head><body> <h2>Stars Beyond the Nvidia Galaxy</h2> <img src="https://cdn.benzinga.com/files/images/story/2024/Wall-Street_1.png?optimize=medium&dpr=1&auto=webp&height=800&width=1456&fit=crop" /><br><div> <p class="block core-block"><strong>Nvidia</strong><span class="ticker" data-ticker="NVDA" data-exchange="NASDAQ" style="display:inline-block">NVDA</span> has undeniably shone as the S&P 500 standout so far in 2024.</p> <p class="block core-block">While Nvidia basks in its 60% gain, others have quietly excelled in their own right, outpacing the market.</p> <p class="block core-block">Within the S&P 500 index, ten stocks have surged over 25% this year, showcasing the prowess of top players.</p> <p class="block core-block">Amidst this, the median S&P 500 stock has seen a modest 3% uptick, while SPDR S&P 500 ETF Trust boasts a solid 7% jump.</p> <h3>Chart-Topping Performers: Feb. 29, 2024</h3> <figure class="wp-block-table is-style-stripes"><figure class="block core-blockblock core-block table" style="overflow-x:auto"> <table class="block core-block table"> <tbody> <tr> <td><strong>Company</strong></td> <td><strong>YTD Return</strong></td> <td><strong>Market Cap</strong></td> </tr> <tr> <td><strong>NVIDIA Corporation</strong></td> <td>60.02%</td> <td>$1,950.35B</td> </tr> <!-- Other top performers listed here --> </tbody> </table> </figure></figure> <p class="block core-block">Investors ponder the future growth prospects of these top performers amidst their impressive run.</p> <p class="block core-block">One way to gauge this is by comparing current stock prices with Wall Street analysts' one-year median targets.</p> <p class="block core-block">Among the top 10, <strong>Uber Technologies</strong> shines with a 13.8% potential upside, followed by <strong>Catalent</strong> at 10% and Nvidia at 7%.</p> <p class="block core-block">However, other stocks in the S&P 500 index boast even more significant potential upsides.</p> <p class="block core-block">Here's a summary of the substantial differences between current market prices and analysts' forecasts.</p> <h4>Top Potential Performers Vs. Analyst Targets</h4> <figure class="wp-block-table is-style-stripes"><figure class="block core-blockblock core-block table" style="overflow-x:auto"> <table class="block core-block table"> <tbody> <tr> <td><strong>Company</strong></td> <td><strong>1-Year Price Target (Med) vs Current Price</strong></td> </tr> <tr> <td><strong>Warner Bros. Discovery, Inc.</strong></td> <td>54.73%</td> </tr> <!-- Other top potentials listed here --> </tbody> </table> </figure></figure> <h3>Exploring Social Sentiments</h3> <p class="block core-block">A gauge of U.S. stock social sentiment is provided by the <strong>VanEck Social Sentiment ETF</strong><span class="ticker" data-ticker="BUZZ" data-exchange="NYSE" style="display:inline-block">BUZZ</span>.</p> <p class="block core-block">This fund channels investments into companies that exhibit</p></body></html><html><head> <title>Insights from BUZZ ETF Holdings</title></head><body> The Buzz Around Top Stock Holdings

TD Cowen analyst John Blackledge expects advertising to bring $68 billion in revenues and account for 35% of the company’s total operating income in 2025. So although it’s a smaller part of the total revenues, advertising is more profitable than AWS or the retail business.

Amazon’s stock has reached an all-time high, yet it appears to be entering a new phase of accelerated growth. The stock can still be a good choice for long-term investors who can overlook share-price pullbacks due to profit-taking in the short term.

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Manali Pradhan, CFA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Netflix, and Spotify Technology. The Motley Fool has a disclosure policy.

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