With Amazon stock (NASDAQ:AMZN) prices down 30% in 2022, many investors wonder whether it is time to buy in the fallen behemoth.
Inflation, conflict, and pandemic-related disruptions have significantly impacted the global economy and financial markets.
The Amazon stock bull case
Despite the current slump, Statista predicts that global e-commerce sales will approach $8 trillion by 2026, up from $5.2 trillion in 2021. That means Amazon has lots of potential to expand its around $500 billion revenue base into an even more significant number in the future. This increase in sales and the company’s cost-cutting measures and automation expenditures could help push Amazon’s earnings much higher in the long run.
The strongest argument favoring investing in Amazon is its dominant position in the cloud. According to research company Markets and Markets, Amazon Web Services (AWS) is the largest supplier of cloud infrastructure services in an industry expected to expand to $947 billion by 2026, up from $445 billion in 2021. AWS is already very lucrative; it produced $5.7 billion in operating income in the second quarter alone. And it’s expected to grow into a much bigger and more profitable industry as firms moving their operations in the near future to the cloud years.
There are several dangers to be aware of.
There is no risk-free situation stock investment. This is true even for Amazon stock (NASDAQ:AMZN), which confronts stiff competition in some of its most crucial areas.
Walmart and Target have recently expanded their e-commerce capabilities. Target’s $550 million purchase of same-day delivery firm Shipt in 2017 was unusually foresighted. Target has become a major force in the fast-growing, quick-delivery grocery business, which Amazon is also looking to expand.
Microsoft is a serious opponent in the cloud computing field. The computer behemoth made it simple for its long-standing business clients to package cloud services with their current software subscriptions. Its highly respected Azure cloud platform increased revenue by 40% in the most recent quarter.
According to valuation, Amazon Stock is properly valued.
Over most of its existence, Amazon’s dominating competitive position and rapid expansion encouraged investors to pay a significant premium for its shares. But it appears that this isn’t the situation right now.
Amazon stock (NASDAQ:AMZN) is now trading at about 33 times operational cash flow. This is close to the middle of its historical appraisal range. It’s also a reasonable asking price for a high-quality company that’s expected to expand at a 33% annualized pace over the next half-decade.
So, is Amazon stock a good investment right now?
Although investors need to be aware of the risks associated with an investment in Amazon stock (NASDAQ:AMZN), the company’s outstanding long-term growth potential and enticing value make its stock (NASDAQ:AMZN) an excellent purchase today.
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Author Okoro Chinedu 