Amazon (NASDAQ:AMZN), a well-known e-commerce stock long-term investors have beaten the market owning, has proven itself to be a formidable player in certain key sectors which have actually driven the vast majority of its growth in recent years. This makes it a boon for AMZN stock.
Whether it’s cloud computing or the company’s long-standing AI capabilities, Amazon remains an e-commerce giant that’s simply more than what investors see on the surface. The company’s AWS division has been a key profit driver for years, and now benefits from new AI tools.
Despite a weak economy in 2022, Amazon rebounded, improving its cost structure and reporting profit gains last year. Currently, Amazon shares are attractively priced. I say that when comparing the company’s current valuation to its historical numbers and future growth prospects.
Amazon still faces persistent criticism despite its dominance in various sectors. Recent layoffs might raise concerns, but history shows AMZN stock is poised for solid 2024 returns. Even with doubters losing money last year, Amazon remains a formidable force, not necessarily requiring continuous workforce growth.
Let’s dive into why this e-commerce giant is worth owning in 2024 and beyond.
Ignore The Layoff Concerns
Amazon disclosed plans to cut hundreds of jobs at Prime Video, MGM Studios, and Twitch, with over 500 layoffs at the gaming platform. While these reductions are a small portion of Amazon’s total workforce, they are deemed to be necessary. Mike Hopkins, SVP of Prime Video and MGM Studios, recently clarified these job cuts, focusing on the need to refocus to create impactful and profitable content. Aggressive hiring in years past also contributed to these moves, and it’s worth noting Amazon is still strategically hiring in other key areas.
I don’t think these headlines warrant concern for long-term investors. Yes, layoffs tend to lead to slower growth (fewer resources generally correlate to such a trajectory). However, Amazon’s size and scale in other key areas essentially make these headlines easy to disregard for the average long-term growth investor.
Given the rapid pandemic-driven expansion and subsequent hiring spree years ago, these recent layoffs align with Amazon’s evolving needs in 2024.
New Generative AI Tools for Shoppers
Additionally, Amazon has recently introduced an AI tool aimed at answering product questions in its mobile app. If users inquire about an item, the feature quickly responds by summarizing information from product reviews and listings. This move has been made to enhance the user shopping experience, and is one of the great examples of how Amazon can leverage AI to improve its offerings over time.
Furthermore, the e-commerce company recently introduced several additional AI tools. Some tools are aimed at generating product review summaries, while other features are aimed at improving the experience for third-party sellers. Overall, I think these moves should certainly improve the efficiency of the Amazon network over time and are no-brainer implementations worth considering.
Excellent Growth Drivers
Amazon’s exceptional investment appeal stems from multiple growth drivers. Notably, the company’s dominance in e-commerce is really what captures most investor attention. Currently, Amazon dominates 38% of all U.S. online spending, with the company noting there’s still significant room for growth, as only 16% of all U.S. retail spending takes place online. Of course, Amazon Web Services (AWS), commanding a third of the global cloud computing market, remains vital to Amazon’s long-term growth story.
I think AWS will continue to be the focus of investors over the next decade. Indeed, AWS is poised to benefit from enterprises transitioning off-premises for cost savings and flexibility. Projections by Grand View Research anticipate the cloud industry to reach $1.6 trillion in revenue by 2030, positioning AWS advantageously.
Digital advertising is thriving due to the online marketplace’s popularity. With Amazon seeing 4.7 billion visitors in November alone, this speaks to the company’s impressive scale. This segment generated $12.1 billion in Q3 2023, reflecting a 25% year-over-year increase.
AMZN Stock Remains a Must-Buy
Over the long term AMZN stock has proven itself to be a solid core portfolio position. In 2024 and the decade to come, I don’t see that narrative changing. Indeed, this e-commerce giant has become a megalith in other sectors, with a strong growth trajectory that should see continued capital appreciation for patient investors.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.