Numerous businesses have made their founders and investors wealthy. Jeff Bezos, the founder of Amazon (NASDAQ: AMZN), is arguably one of the most well-known billionaires.
Bezos probably had no idea Amazon would grow to be as big as it is now when he founded the company in 1994. However, Bezos, a significant stakeholder in the company, soon became one of the richest men in the world as a result of his growing product offerings.
Bezos possessed more than 1.1 billion Amazon shares as of February 22, which, at current prices, is valued more than $200 billion. Given that it has already produced one billionaire, is it possible that it has produced more?
The rise of Amazon was astounding.
In 1997, on May 15, Amazon went public. Investing in the stock at its initial public offering (IPO) price has made you a whopping 183,000% profit.
Given that information, you would have needed to have invested about $600,000 on the day of its initial public offering (IPO) almost 30 years ago if you had wished to become a billionaire. It’s unlikely that anyone will become a billionaire alongside Jeff Bezos because most people wouldn’t have placed that wager.
Though it made many investors wealthy along the way, Amazon was still a fantastic investment. Is it still capable of that, though? Amazon is still a very powerful company, after all.
Even today, Amazon remains a formidable force.
Amazon proved how robust its business is even in the most recent quarter. Year-over-year growth in overall sales to $170 billion was observed, with almost all business units exhibiting strong performance. Even though Amazon is home to multiple growth wings, some may view it as fairly established.
With growth rates of 27% and 20% in Q4, respectively, Amazon’s advertising and third-party seller services have performed incredibly well. Additionally, these are not merely minor splits. These two made up approximately one-third of Amazon’s total revenue, or $58.2 billion, when combined.
Another business-driving growth segment that hasn’t performed as well lately is Amazon Web Services (AWS). Being the largest cloud computing provider, AWS is important at a time when many businesses are trying to boost their processing capacity for tasks like training artificial intelligence (AI) models or gathering data.
Although it temporarily hurt sales, AWS’s 2023 customer optimization efforts improved relationships with customers, which will pay off in the long run. In 2024, investors will be happy to hear that management believes AI will increase and this trend will diminish.
Despite being one of Amazon’s slower-growing business segments, the majority of consumers are aware of and engage with the company’s commerce division. In Q4, online store growth was 9%, which is pretty good when you compare it to the growth this segment has shown in previous quarters. It isn’t, however, the best justification for owning Amazon stock.
Although Amazon is obviously doing well, is this the right time to buy the stock?
Although not inexpensive, Amazon’s stock is also not overpriced.
Value-wise, Amazon is one of the harder companies to assess. Price-to-earnings (P/E), a conventional metric, could be used, but it would provide an inadequate outcome because Amazon’s profitability over the previous 12 months was not optimized. Using a forward-looking price-to-earnings ratio, Amazon’s stock continues to be highly expensive.
Additionally, some of Amazon’s divisions—most notably its international business—don’t turn a profit, so this doesn’t do the company justice. After Amazon has expanded its global resources, investors should take this into account as it will result in a sizable profit boost.
I will therefore examine Amazon’s stock valuation using the price-to-sales (P/S) metric.
Despite reaching levels last seen at the 2020 low, Amazon’s stock has been on an incredible run since the beginning of 2023. As such, Amazon’s stock continues to appear inexpensive when viewed historically.
The current price of the stock would be a steal for Amazon if its revenue growth keeps up. On April 30, though, when Amazon releases its Q1 earnings, we’ll know more.
Amazon still seems like a good enough investment to make right now, in my opinion. It’s understandable, though, if investors wish to wait until after earnings are announced in order to make sure the present trends continue.