From Nasdaq:

Amazon’s stock, listed on the NASDAQ, has the potential to make a “parabolic” move due to the continued growth in revenue and surprising growth in newer segments of its e-commerce business model. Warren Buffet’s Berkshire Hathaway first invested in Amazon stock in 2019, recognizing this potential.

Most of Amazon’s profits come from a smaller segment of the company, including Amazon Web Services (AWS), which accounts for most of the company’s operating income. While AWS made up about 17% of its revenue, it earned $17 billion of the $24 billion in operating income for the company, showcasing its profitability.

Revenue from e-commerce services, such as third-party seller services and subscription services, saw rapid double-digit growth, while Amazon’s online sales grew at just 7%. This shows that smaller segments drive the majority of operating income for Amazon, making income growth easier to achieve.

While Amazon’s P/E ratio of 80 may deter some investors, its forward P/E ratio is 43, well below 2021 levels. Improved business conditions and anticipated earnings growth indicate more room for the stock to surge, as it has risen approximately 60% over the last year.

Although no analyst can promise a stock will go parabolic, Amazon’s smaller businesses, like AWS and e-commerce services, can outpace online sales, which can grow at a higher rate. Additionally, its forward P/E ratio at a lower level historically indicates it can rise rapidly without reaching historical highs in valuation.

The Motley Fool’s Stock Advisor team does not believe that Amazon is among the 10 best stocks for investors to buy now. However, it has more than tripled the return of the S&P 500 since 2002. John Mackey, former CEO of Whole Foods Market, is on the board of The Motley Fool, which has positions in and recommends Amazon and Berkshire Hathaway.



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