Amazon.com, Inc. (NASDAQ:AMZN) shares have soared 110.38% over the past five years, outperforming the S&P 500 by a margin of about 28.4%. This stellar performance could be a result of its strong and improving finances. I I am bullish on this stock given its innovative culture that allows it to remain relevant to dynamic consumer needs as well as its commitment to improving customer experience. From a technical perspective, the upward trajectory is strong and, therefore, I rate this company a Buy.
Let's start technically
I find that AMZN has two main areas where its prices have moved. It enjoys strong support at around $80.46 and strong resistance at around $187.62. Since January 2023, the stock has bounced off the support zone and is on a strong upward trajectory as indicated the blue line. I expect this trend to continue until the price reaches the resistance zone where a reversal is likely or a breakout could occur depending on the growth catalysts and market sentiment.
To better evaluate these price actions, I dig deeper to evaluate what the technical indicators are showing. First, the price is above its 50, 100, and 200 day MAs, indicating that it is in an uptrend. Additionally, the 50 and 100 day rates presented a bullish crossover, confirming that this trend is strong and likely to continue.
Additionally, the MACD and RSI point to a strong upward recovery. The MACD is above and diverging with the signal line, indicating strong bullish momentum which is confirmed by its histogram above the zero line and growing. The RSI is at 76.3 and although this shows that it is in the overbought zone, it appears to be rising and approaching the 100 level, indicating that a reversal is not yet likely.
I'm very interested in the rate of change in the price of this stock. While other indicators have highlighted that the recovery is underway, it is essential to assess the strength of this dynamic. Since October 2023, the ROC has increased steadily, indicating that the upward trend is very strong and likely to be sustained.
In conclusion, it is very evident that AMZN is experiencing strong bullish momentum with no signs of reversal. For this reason, I think this stock is a good investment opportunity for dynamic investors. However, they should keep a close eye on the indicators in order to spot good exit points, perhaps when the price hits the resistance zone and the ROC starts trending down and the MACD histogram begins to contract or even falls below the zero line.
Financial data: nothing short of impressive
For about a decade, Amazon had no trouble generating revenue, but turning sales into profits was a challenge. This prompted the founder to focus on growth initiatives and eventually profits began to be made, with 2017 being the break-even point. However, 2022 was a difficult year, which saw the company's net profit fall to around $2.7 billion. However, since then the company appears to be on the right track, both in terms of revenue and bottom line, as shown below.
Let me turn your attention to MRQ's performance to demonstrate how much better this company is performing on the frontline. Net sales were $169.96 billion, 14% year-over-year.
Its operating profit amounted to $13.2 billion, representing growth of 383% year-on-year.
The company's net income also saw impressive growth, from $278 million in Q4 2022 to $10.6 billion in Q4 2023.
Although this performance seems astonishing in absolute terms, I think it is more appealing when looked at comparatively. To do this, I draw your attention to the company's growth and profitability indicators compared to sector medians. Starting with growth, AMZN is more than 100% ahead of the industry median in all metrics, making this company a good growth pick in comparison.
When it comes to profitability, the company also significantly beat industry medians in almost every metric, making it a leader in the profitability race, as confirmed by the overall 'A+' rating in profitability according to Seeking Alpha.
In summary, AMZN performed very impressively after turning around its profitability issues. Currently, the company is showing very attractive growth and profitability, both in absolute and relative terms, making it a good investment choice for investors focused on growth and profit.
Given this exceptional performance, the most critical part is to evaluate what this company has done to achieve such performance, because this is what can assure us that the company will be able to sustain it in the long term. In my opinion, Amazon's exceptional performance has been achieved due to its innovations that have helped it stay relevant to dynamic consumer needs as well as its focus on improving customer services. I will cover these aspects in the sections that follow.
Innovate to meet dynamic customer needs
Although I agree with most analysts that Amazon has achieved its strong growth and performance through its excellent Amazon Web service characterized by dominant market share and e-commerce dominance, being the first global online retailer with over 300 million users, I would like to assess what has led to such leading positions in these major areas.
The first aspect that I believe has pushed AMZN to these heights is its investment in innovation, particularly in emerging customer trends. To support this assertion, I will discuss three of his innovations. The first is its online grocery store. This is one of the fastest growing e-commerce market segments as consumers seek convenience. According to Statista, the online grocery segment is expected to grow at a CAGR of 12.74% by 2028. This shows that this company is investing in fast-growing segments, which bodes well for its future growth . Currently, Amazon is second in online grocery market share, slightly behind Walmart, indicating that its company has a significant presence in the market.
The other innovation is Amazon One which is a biometric payment system. This product allows users to verify payment by scanning their palms, which is in line with contactless payment trends since Covid 19. According to Precedence Research report, the contactless payment market size is expected to grow at a CAGR by 16.1% between 2023 and 2032 further shows how Amazon is investing in high-growth market segments.
Finally, Amazon invented Lambda, a serverless computing service that supports multiple programming languages. Among his benefits is its ability to run codes without managing services. The global serverless market share is expected to grow at a CAGR of 22.24% by 2027.
Following these innovations in high-growth segments, it is evident that AMZN is investing in response to emerging consumer demands as well as emerging trends, enabling this company to remain relevant to dynamic consumer needs. In my opinion, this will not only be a major competitive advantage but will also go a long way in improving the company's customer satisfaction.
Committed to improving the customer experience
It's very appealing to see a company innovate to meet dynamic and emerging consumer needs, but I think it's even interesting to see the company striving to improve its customer experience. All of this is available on Amazon. To support my statement, I will just discuss two examples of how this company strives to improve its customers' experience.
For starters, the company has significantly improved its delivery time in 2023, making it the fastest ever in the world. It has delivered more than 7 billion units on the same day or the next day at most. This represents an improvement of approximately 65% year-over-year in Q4 2023. In my opinion, this fast delivery improves its reliability and convenience, which translates into better customer satisfaction.
Second, the company considered improving the health of its primary members by announcing that they can add healthcare from a single medical for $9/month and up to five family members for $6 each. This would result in an individual savings of approximately $100 compared to conventional membership rates and a family savings of approximately $133.
These are just two examples of a lot initiatives that Amazon is adopting to better serve its customers. For these reasons, it is evident that this company puts its customers first, which will go a long way in improving customer satisfaction. This will also enhance its reputation as an organization acting as a MOAT and therefore sustainable growth in the long term.
Things to remember about investing
From a technical point of view, this stock is experiencing strong upward momentum supported by strong financial growth and strong profitability. The company's innovative culture and commitment to improving the customer experience bodes well for the company's long-term sustainable performance. As a result, I recommend this stock to investors focused on momentum, growth and profit.
However, investors should be aware of the major risk of investing in this stock, which is increasing competition from other e-commerce companies. For example, Amazon is lagging behind Walmart in the online grocery business, while Walmart is expected to open the competitive gap on this front. While I think Amazon's diversity can offset such events, it's important for investors to closely monitor how this company responds to increasing competition.