Table of Contents
Show more
Show less
Amazon (AMZN) is one of the world’s major corporate success stories of the past 30 years.
Founded by Jeff Bezos from his garage in Bellevue, Washington in 1994, the business has grown into a vast, publicly-listed multinational retailing and technology company that focuses on e-commerce, cloud computing, online advertising, digital streaming and artificial intelligence (AI).
Best known for its online marketplace, customers also interact with the company through a range of channels including websites, apps, the Alexa smart speaker, device streaming, and physical visits to its stores.
The business, one of the 10 largest in the world with a market capitalisation of about $1.8 trillion (March 2024), also makes and sells electronic devices, including Kindle, Fire tablet, Fire TV, Echo and Ring. The company also develops media content and offers subscription services such as Amazon Prime.
Segments within the company include North America, International and Amazon Web Services (AWS). Amazon went public as a business in 1997 and, since then, has announced four stock splits, the most recent being a 20-for-1 split of common stock effective from June 2022.
Amazon is a member of the ‘Magnificent Seven’ group of high-growth companies that includes the likes of Apple, Alphabet (Google’s parent company) and Microsoft.
Amazon’s share price history
Amazon’s share price stands at $175.80 (18 March 2024). As the graph below indicates, the company’s price has broadly trended upwards since hitting a low of $82.87 in the last week of December 2022
The direction of travel since then coincides with a general easing of inflation over the past year, both in the US and abroad, plus a levelling-off from the extended period of interest rate rises by central banks worldwide to head off soaring prices.
How will Amazon perform in 2024?
It is impossible to predict with certainty how a company’s share price will behave. The stock’s behaviour depends partly on the business’s internal performance, combined with wider macro-economic events affecting the markets in which it operates.
Amazon’s Q4 2023 earnings results, published in February, showed that fourth quarter net sales for the company had risen by 13% year-on-year to $170 billion.
Significant increases in retail profitability, coupled with higher-margin web services growth, meant operating income was $13.2 billion, up from $2.7 billion the previous year. Overall, the feeling among stock market analysts was that performance had been better than expected.
Against this backdrop, we’ve asked leading commentators what investors could potentially expect from Amazon’s performance for the remainder of this year and beyond.
Fiona Cincotta, senior market analyst at City Index, is probably the most punchy in her analysis: “Amazon has had a strong start to the year, rising around 16% year-to-date as it approaches its 2021 record [share price] high of $188. The stock is outperforming the S&P 500, which trades 8% higher this year, and the Nasdaq, which has risen 9%.
“As a member of the Magnificent Seven, which drove much of last year’s US stock market gains, clear differences are appearing in the share price performance within this handful of companies this year. Businesses that are more AI-focused, such as Nvidia, Meta and Amazon, are the ones which are outperforming.
“Strong earnings and expanding AI capabilities are helping Amazon to write the next chapter of its growth story. While e-commerce business growth is decelerating, AWS has become an increasingly central focus within the company, using AI to lower prices and boost productivity for its cloud services clients. This, combined with news of a deal with Anthropic, Chat GPT’s rival, means that Amazon’s hat is well and truly in the AI ring.
“Given the focus on AI development and investors’ insatiable appetite for AI-related stocks, Amazon could breeze past its all-time high to $200 this year and potentially $250 if the US Federal Reserve were to cut interest rates several times.”
Julian Wheeler, partner at Shard Capital, also expects a continued strong run from the company: “I expect the stock will continue higher as the company sees improved margins across all its divisions. Therefore, Amazon can and should continue to amaze the market with better-than-expected results.
“In logistics it has already integrated other online sites, such as the partnership with Meta [another Magnificent Seven member], whereby customers buy through Facebook, with deliveries being fulfilled by Amazon.
“In the retail segment, Prime Video is just beginning to add advertising to its programming, providing a new leg of revenue growth in a streaming industry which is becoming more profitable for all thanks to more rational decisions on costs and pricing.
“Finally, AWS, the cloud business, will see more profitable growth thanks to a combination of new AI-related spending and a bounce in its use after the period of customer ‘optimisation’ seen during the last two years.”
Mamta Valechha, equity research analyst at Quilter Cheviot, says: “We remain positive on Amazon and expect the price to move upwards this year. The company’s growth has been driven predominantly from the US retail business. Its fulfilment centres have become more efficient and are cutting delivery times, which will keep it at the top of preferred retailers for customers.
“It is also seeing spending cuts on cloud computing from business abate as confidence returns to the global economy. With Amazon’s AI capabilities it should also see demand supported going forward. Like the rest of the tech industry, capital expenditure is growing as the likes of Amazon look to take advantage of the tailwinds that they already have.”
Nick Saunders, CEO of Webull UK, says: “Webull UK clients are relatively undecided about the stock’s prospects, with buying and selling volume relatively even over the last three months. Total buys are only 5% higher than sales, not a significant difference. In the medium term, this suggests Amazon could test its previous high from 2021, but may struggle to push far beyond it.
“We would expect significant profit-taking after a strong rally, and on a less technical level, Amazon’s failure to make significant inroads outside its domestic market leave it exposed to increased competition in the US. Despite this, large tech is very much a sector in favour with investors, and the potential for growth is strong. In the short term, our clients seem to feel that Amazon is a longer term investment rather than a speculative buy.”
Kate Leaman, chief market analyst at AvaTrade, says: “Amazon has historically demonstrated a robust performance, a trend that many anticipate continuing. Despite occasional market fluctuations, the company’s diverse business model positions it for sustained growth.
“The company’s adaptability and innovation-driven approach, especially in expanding its services and entering new markets, reinforce its potential for long-term value appreciation.
“However, potential challenges such as regulatory scrutiny, competitive pressures and global economic uncertainties could impact its share price trajectory. Given these factors, a cautiously optimistic outlook is warranted. Amazon’s ability to maintain its growth momentum and navigate through market and operational challenges will be crucial for its share price performance in the coming years.”
Simon Lapthorne, senior research analyst at Investec Wealth & Investment (UK), says there are several factors investors need to take into account when determining Amazon’s potential share price movement: “First, does the company make its guidance [achieve its forecasts] and will the company’s North America segment maintain or improve profitability levels?
“Also, when does the International division turn profitable and how does AWS perform? The key point about the company is that it is run for the long-term, not the short-term. In other words, the business will invest as and when it sees fit, which can materially impact short-term performance and potentially the share price. This is why it is more than usually a fool’s errand to try and predict what will happen in the short term.”
Is Amazon a worthwhile investment?
There’s little doubt that Amazon is a leader in e-commerce and enjoys unrivalled scale to invest in growth opportunities with a view to driving the best customer experience. On top of this, high-margin advertising and AWS are growing faster than the corporate average which should bolster the company’s corporate profitability in the year ahead.
Being able to provide a unique experience that convinces customers to return for more of the same is a strength which could make investing in Amazon shares an attractive long-term prospect.
That said, investors need to remain mindful of ongoing volatility. Although inflation has eased in most of Amazon’s key markets, the economic outlook remains slightly uncertain with prices taking longer to fall than had been anticipated. In addition, an environment of elevated interest rates could impact on consumption and also keep the cost of servicing debt high for the company.
