Amazon Stock Outlook: Analysts Project Significant Growth Potential

Where Will Amazon Stock Be in 1 Year? | The Motley Fool

Since the beginning of last year, Amazon (AMZN -0.29%) stock has experienced a resurgence. It is near an all-time high, as its recovery erased all the losses of the 2022 bear market and rose by about 55% over the last year. With that gain, investors may question what it can do over the next year. Will its march higher continue, or will its considerable growth over a short time frame set it up for another pullback over the next 12 months? At first glance, investors may credit Amazon's gains with artificial intelligence (AI). Indeed, the optimism surrounding generative AI has boosted stocks such as Nvidia and Palantir. With its position as the leading cloud infrastructure provider through its Amazon Web Services (AWS) segment, mastering AI is critical to Amazon maintaining its market lead. To this end, Amazon invested $4 billion in a company called Anthropic. Anthropic's software trains Amazon's generative AI models by working with AWS's proprietary AI chips. Considering the tremendous demand for such technology, Amazon's work in this area may foster a competitive advantage in the AI field. However, AWS is not the only reason to like Amazon stock. Although online sales are a large but relatively slow-growing part of the business, the company has leveraged its massive web presence to develop separate businesses, and the most successful is likely its digital advertising business. Considering the success of Alphabet and Meta Platforms in advertising, it may not surprise investors that this is the fastest-growing business listed in its quarterly reports. In the first quarter of 2024, digital ads brought in almost $12 billion in net sales. That was a yearly increase of 24%, outpacing the 17% growth rate of AWS. Overall, Amazon's net sales came in at $143 billion in the first quarter of 2024, 13% higher than year-ago levels. That also means the company's sales have kept pace with past quarters, as net sales grew by 12% annually in 2023. During that time, Amazon limited cost and expense increases to 4%, allowing net income to rise to over $10 billion. In comparison, Amazon earned just under $3.2 billion in the first three months of 2023. Despite such improvements, the company expects a slowdown as it forecasted a net sales increase between 7% and 11% in Q2, citing unfavorable foreign exchange rates as a reason for that slowdown. Nonetheless, the rapid recovery in net income has reflected well on its valuation. Its P/E ratio of 56, while higher than some peers, is actually near a multiyear low for Amazon. Hence, the fact that it could experience significant multiple expansion without rising above historical norms should bode well for the stock. Amid its low valuation, Amazon stock appears on track to closely approximate last year's growth rate over the next year. Amazon could experience another bear market pullback if the slowing in net sales growth comes to pass and continues. However, Amazon seems to have emerged as an AI leader, and its market lead in the cloud and investments in AI bode well for the company's future. Moreover, Amazon's retailing segments seem to have fostered success in digital advertising and other businesses. Hence, even if the online sales business does not perform well, continued successes in smaller but more profitable businesses could take the internet and direct marketing retail stock higher over the next year.

Where Will Amazon Stock Be in 1 Year?

Since the beginning of last year, Amazon (NASDAQ: AMZN) stock has experienced a resurgence. It is near an all-time high, as its recovery erased all the losses of the 2022 bear market and rose by about 55% over the last year. With that gain, investors may question what it can do over the next year. Will its march higher continue, or will its considerable growth over a short time frame set it up for another pullback over the next 12 months? Why Amazon stock has risen At first glance, investors may credit Amazon's gains with artificial intelligence (AI). Indeed, the optimism surrounding generative AI has boosted stocks such as Nvidia and Palantir. With its position as the leading cloud infrastructure provider through its Amazon Web Services (AWS) segment, mastering AI is critical to Amazon maintaining its market lead. Data source: Statista. To this end, Amazon invested $4 billion in a company called Anthropic. Anthropic's software trains Amazon's generative AI models by working with AWS's proprietary AI chips. Considering the tremendous demand for such technology, Amazon's work in this area may foster a competitive advantage in the AI field. However, AWS is not the only reason to like Amazon stock. Although online sales are a large but relatively slow-growing part of the business, the company has leveraged its massive web presence to develop separate businesses, and the most successful is likely its digital advertising business. Considering the success of Alphabet and Meta Platforms in advertising, it may not surprise investors that this is the fastest-growing business listed in its quarterly reports. In the first quarter of 2024, digital ads brought in almost $12 billion in net sales. That was a yearly increase of 24%, outpacing the 17% growth rate of AWS. How this affects the stock Overall, Amazon's net sales came in at $143 billion in the first quarter of 2024, 13% higher than year-ago levels. That also means the company's sales have kept pace with past quarters, as net sales grew by 12% annually in 2023. During that time, Amazon limited cost and expense increases to 4%, allowing net income to rise to over $10 billion. In comparison, Amazon earned just under $3.2 billion in the first three months of 2023. Despite such improvements, the company expects a slowdown as it forecasted a net sales increase between 7% and 11% in Q2, citing unfavorable foreign exchange rates as a reason for that slowdown. Nonetheless, the rapid recovery in net income has reflected well on its valuation. Its P/E ratio of 56, while higher than some peers, is actually near a multiyear low for Amazon. Hence, the fact that it could experience significant multiple expansion without rising above historical norms should bode well for the stock. Amazon in one year Amid its low valuation, Amazon stock appears on track to closely approximate last year's growth rate over the next year. Amazon could experience another bear market pullback if the slowing in net sales growth comes to pass and continues. However, Amazon seems to have emerged as an AI leader, and its market lead in the cloud and investments in AI bode well for the company's future. Moreover, Amazon's retailing segments seem to have fostered success in digital advertising and other businesses. Hence, even if the online sales business does not perform well, continued successes in smaller but more profitable businesses could take the internet and direct marketing retail stock higher over the next year. The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now... and Amazon wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $780,654!* Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Will Healy has positions in Palantir Technologies. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, Microsoft, Nvidia, Oracle, Palantir Technologies, Salesforce, and Tencent. The Motley Fool recommends Alibaba Group and International Business Machines and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy. The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.