Amazon.com Inc (AMZN)

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Bull of the Day: Amazon.com, Inc. (AMZN)
By: Zacks Investment Research | December 19, 2023

Amazon’s (AMZN) rebound kicked back into high gear following its big beat and raise third quarter at the end of October, with AMZN shares up roughly 85% in 2023.

The e-commerce and cloud computing giant’s comeback has been powered by its commitment to boosting earnings and transforming into a mature tech firm that posts impressive top-line growth and massive, constantly expanding profits.

Some investors might be worried they ‘missed out’ on Amazon’s rally and could be afraid about what’s next for the so-called Magnificent Seven tech stocks. There could be some selling and choppiness in the near term for the market and big tech following the huge rally to end a strong year.

Yet, Amazon trades solidly below its all-time highs and its average Zacks price target, and its valuation levels have improved as it focuses on the bottom line. Amazon’s various businesses are also more entrenched in the economy than ever.

Multiple Growth Engines

Slowing cloud growth and higher rates hit Amazon stock hard in 2022—alongside most of the technology sector. Thankfully, rates are coming down and AMZN is focused on profits and maximum efficiency under CEO Andy Jassy.

Better yet, Amazon still runs the world’s largest cloud-computing business. Cloud computing is a key pillar of the modern economy and is growing in importance.

The combination of steady cloud computing growth and a concentrated effort on boosting earnings now and forever is the pitch that breathed fresh life into Amazon stock in 2023 and likely will for years to come.


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AWS sales climbed 12% in the third quarter, accounting for around 16% of total company revenue. The high-margin segment is eclipsed by its far-large e-commerce unit in terms of overall sales. Yet AWS accounted for over 60% of Amazon’s operating income last quarter and is poised to remain Amazon’s profit hub going forward. Amazon reportedly held 32% of the cloud computing market last quarter vs. Microsoft’s (MSFT) 22% and Google’s 11%.

Amazon is attempting to improve AWS margins by rolling out more in-house chips. Amazon is actively introducing AI-focused efforts to attract customers to spend more as everyone races not to get left behind on tech's new frontier. On top of that, Amazon is expanding its collaboration with Nvidia (NVDA) for cutting-edge chips.

On the e-commerce front, Amazon is benefitting from its transition from a single national fulfillment network in the U.S. to eight distinct regions. Amazon currently holds nearly 40% of the total e-commerce market share in the U.S., blowing away second-place Walmart’s 7%. The company is also growing its digital advertising segment. The unit climbed 25% in Q3, marking the largest YoY gain on a percentage basis.


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Amazon is also aiming to boost its Prime segment by rolling out more live streaming entertainment efforts. For example, new reports say Amazon is in talks to invest in regional sports standout Diamond Sports Group.

Near-Term EPS & Revenue Outlook

Current Zacks estimates call for Amazon to post 11% revenue growth in 2023 to pull in $570.75 billion and then climb 12% higher next year to reach $637.05 billion. This would see the firm add a projected $124 billion to the top line between FY22 and FY24, which is more than retail and e-commerce firm Target made in FY22 ($109 billion). These figures mark improved expansion from its 9% revenue growth last year.

Amazon’s earnings guidance keeps getting better. AMZN’s consensus fourth quarter EPS estimate has jumped by 15% since its Q3 report, with its FY23 estimate 20% higher and 13% better for FY24.


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Amazon is projected to post 276% earnings growth in 2023, climbing from $0.71 to $2.67 a share. AMZN is then expected to boost its earnings by another 32% next year to reach $3.53 per share.

On top of that, its most accurate/most recent estimates for FY23 and FY24 came in above consensus. Amazon’s overall improved earnings outlook helps it land a Zacks Rank #1 (Strong Buy) right now. The recent positivity is part of a prolonged stretch of surging earnings outlooks that began in early 2023.

Performance, Technical Levels & Valuation

Amazon stock has climbed 665% in the last decade to blow away the Zacks Tech sector’s 250%. Despite this run, Amazon is down 4% in the last three years vs. the Zacks Tech sector’s 22% climb.

AMZN has surged 84% in 2023 to top Microsoft’s 55% and Apple’s 51%. Unlike Apple, MSFT, and Nvidia, Amazon hasn’t posted new all-time highs in 2023. Amazon currently trades around 17% below its all-time highs and its average Zacks price target marks 16% upside to Monday’s levels.

Amazon hit new 52-week highs on Monday, having found support at its 21-day moving average recently. AMZN shares have also retaken their very long-term 50-week moving average.


Image Source: Zacks Investment Research

On the valuation front, Amazon trades over 65% below its highs and at a 45% discount to its 10-year median at 42.8X forward 12-month earnings. This is still clearly very ‘pricey’ for many investors. But there are signs that Amazon’s forward earnings multiple will keep coming down.

Amazon’s PEG ratio, which factors in its earnings growth outlook, marks a 25% discount vs. the Zacks tech sector at 1.5. Better still, Amazon’s PEG ratio sits near its lows over the last 10 years.

Bottom Line

Amazon is a powerhouse in multiple key areas of the economy that aren’t going out of style. Therefore, investors might want to buy Amazon as a straightforward investment into mega-cap technology and its growing sway over our lives and the market.

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