This Outstanding Equity Has Fostered Numerous Millionaires' Fortunes and Potentially Boosts More Wealth.
Declaring that Amazon.com (AMZN shedding -1.45%) has been a fruitful investment over the years would be significantly downplaying its success. Since its public debut in 1997, Amazon has delivered an astounding 233,100% return to investors.
It's not merely the initial investors who have reaped significant benefits. Even if you had joined the bandwagon a decade ago and acquired Amazon shares, the value of your investment would have multiplied over fifteenfold. Therefore, while it's impossible to ascertain the exact number of investors who have amassed life-altering wealth through Amazon stock, it's fair to assume that Amazon has made countless long-term investors millionaires.
Remarkably, I don't entirely rule out the possibility of buying Amazon stocks even today. The company's future prospects are compelling, despite sporting a colossal $2.4 trillion market cap.
Plenty of scope for development on both fronts
Amazon's business is essentially divided into two primary segments: the e-commerce platform and the Amazon Web Services (AWS) cloud-infrastructure side. Both sectors exhibit substantial growth potential.
At present, e-commerce contributes significantly to Amazon's revenue. In the recent quarter, sales in North America and internationally escalated by 9% and 12%, respectively, amounting to an aggregate of approximately $131.5 billion. Notably, online sales in the US represent only about 16% of overall retail sales, with this proportion gradually expanding. In some of Amazon's international markets, e-commerce penetration is even lower.
As regards international operations, it's worth noting that more than 70% of Amazon's e-commerce business still hails from North America. This implies an enormous potential for expansion beyond North America's borders.
On the AWS front, the future appears bright. AWS currently generates around 17% of Amazon's revenue and is both the quickest growing and most profitable segment. In the recent quarter, AWS grew by 19%, contributing 60% of Amazon's operating income, despite accounting for only 17% of overall sales.
Even this could be just the beginning. According to Fortune Business Insights, the cloud-computing market is projected to surge by more than threefold from 2024 to 2032. If AWS manages to maintain its current market share, it could significantly enhance its earnings potential in the years to come.
Emphasis on efficiency and profitability
When Andy Jassy assumed the role of CEO in mid-2021, he focused on enhancing the efficiency of Amazon's operations. Investors have applauded this shift, as Amazon's operating margins have nearly doubled over the past five years. During the latest quarter, Amazon's net income per share escalated by a remarkable 44% year-on-year, and trailing-12-month free cash flow increased a staggering 123%.
In summary, profitability continues to improve, and there's no indication that this trend will abate soon. Even though the stock's price-to-earnings ratio of 39 times seems exorbitant, the blend of growth potential and margin expansion may render the stock a more affordable investment than it appears.
Conclusion
Amazon stands as a prime example of a stock that some investors might consider to no longer represent a "growth story" solely due to the company's colossal size. It's certainly plausible that some perceive limited prospects for upside given Amazon's massive influence on the daily lives of millions.
However, Amazon boasts more room for growth than one might suppose. It's not an inexpensive stock, but considering its position in a decade or so, it could prove a shrewd investment.
If you're thinking about venturing into investing, considering Amazon stocks could be a worthy consideration. The company's impressive growth in both its e-commerce and AWS segments, along with a focus on improving efficiency and profitability, suggests a promising future.
Moreover, the vast potential of the cloud-computing market, with projections for a threefold surge in the coming years, could significantly boost AWS' earnings potential. As long as Amazon maintains its current market share, investors might see substantial returns.