30% cheaper, is Amazon buying?
- Amazon shares have lost almost all of their gains since the pandemic
- It is still difficult to determine the bottom for action given the uncertain macroeconomic environment
- However, Amazon continues to make acquisitions, diversifying its market presence
So far this year, Amazon.com (NASDAQ: ) (BVMF: ) is the worst-performing stock in the trillion-dollar market cap club that includes Apple Inc (NASDAQ: (BVMF: ) , Microsoft (NASDAQ: ) (BVMF: ) and Alphabet (NASDAQ: ) (BVMF: ) Shares of the Seattle-based giant have lost about 30% of their value over the past 12 months.
The sharp decline deprived the company’s investors of almost all of their gains from the pandemic. anyway, It remains difficult to establish a stock fund as rising interest rates continue to hit stocks like Amazon, reducing the value of their future earnings. In addition, inflation increases costs, while a stronger dollar hurts earnings abroad.
With a market capitalization of $1.18 trillion, Seattle-based Amazon remains the fourth most valuable company in the US behind Apple, Microsoft and Alphabet. Despite investor jitters and market volatility, I remain bullish on AMZN’s growth prospects and expect the stock to rebound in the coming months.
While Amazon’s core e-commerce business struggles with high costs and slowing growth in consumer demand, the company’s other units continue to post strong growth.
Amazon’s web services grew 33% in the second quarter to $19.7 billion. Amazon’s advertising business, for which the company recently began reporting financials, grew 18% to $8.8 billion in the quarter.
Belt tightening after massive expansion
Considering its healthy balance sheet, high free cash flow and highly diversified business model, it’s not hard to see that Amazon remains in a solid position to weather the current hostile economic environment.
In addition, the company is taking steps to reduce costs. Amazon’s total workforce shrank by about 100,000 in the second quarter, and the company is reducing warehouse space as CEO Andy Jassy embarks on a pandemic-era expansion amid slowing growth. Fulfillment costs rose less than analysts had predicted in the latest quarter.
Despite this era of belt-tightening, Amazon is not missing out on opportunities for growth. It continues to make acquisitions that further strengthen its market position and diversify its revenues beyond its core e-commerce business.
During the last quarter, Amazon announced the purchase of virtual health company One Medical for $3.49 billion and iRobot Corp, the maker of Roomba vacuum cleaners, for $1.65 billion, earning praise from analysts who see long-term value in the deals.
Amazon’s leadership in many of the areas it operates in is the main reason most Wall Street analysts rate its stock a buy. In Investing.com’s survey of 54 analysts, 49 rate the stock a buy, with a 12-month consensus price target indicating upside of 51.68%.
Of course, owning Amazon still comes at a price, even though the stock has fallen in price this year. The stock is selling for 47 times the expected earnings for the next 12 months. 100, on the other hand, has an average multiple of about half that.
Still, betting on the company has been extremely profitable for long-term investors, with its shares up around 900% over the past decade.
The final result
Amazon stock was the worst performer among the mega-cap tech giants in the bear market. But the giant’s long-term investment appeal remains intact, given its dominance in e-commerce and explosive growth in its cloud and advertising business. On the upside, AMZN is well positioned to outperform its peers, in my opinion.
Detection: At the time of writing, the author is long on AMZN, AAPL and MSFT. The opinions expressed in this article are solely those of the author and should not be construed as investment advice.