Amazon Stock Is Up 27% This Year. Where Will It Be by the End of 2024?
Amazon (NASDAQ: AMZN) stock is beating the market, up 27% as we enter the second half of the year. Investors are enthusiastic about its prospects in artificial intelligence (AI), but that's only the tip of the Amazon iceberg. Where might Amazon be by the end of the year?
What happened in the first part of the year?
Amazon had an excellent first-quarter report and many updates about new AI launches. Sales increased 13% year over year in Q1, and operating income more than tripled to $15.3 billion. Earnings per share (EPS) of $0.98 flew past Wall Street's expectations.
Amazon is investing in AI in all sorts of ways. It committed $230 million to invest in an accelerator for AI-based start-ups, awarding $1 million to the top 80 applicants "that are using generative AI to solve complex challenges." Last week, it announced an investment in EvolutionaryScale, an evolutionary biology firm that's using generative AI and machine learning to create transformative pharmaceutical products. Those are just two of the ways it's positioning itself to benefit from real changes using generative AI.
Other updates were the addition of new, popular brands to the e-commerce platform and new spring sale events. In the 60 largest U.S. metro areas, 60% of orders were delivered within 48 hours, and in several global large cities like Tokyo and London, 75% of orders were delivered the same or next day.
Amazon continues its strides in advertising, which once again was its fastest-growing category. Sales were up 24% year over year. Sponsored products were the main driver, which makes a lot of sense. Amazon is leveraging its unmatched shopping platform to make money from ads, and it also makes money when the ads lead to product sales. Amazon can offer incredible data for advertisers based on its decades of machine learning, creating opportunities for pinpoint accuracy and success.
What could happen next
Amazon is continuing down the generative AI road, and I wouldn't be surprised if it makes some major announcements over the next few months. It will almost definitely expand its AI services for Amazon Web Services (AWS) customers and improve its AI capabilities for e-commerce and advertising. It's already pouring hundreds of millions of dollars into creating the next level of AI technology, and there are likely to be ongoing results.
It will probably be making more deliveries faster to more people and signing new high-profile clients for AWS. Amazon is already back on the upswing despite stubborn high inflation, and if inflation does begin to ease, performance could improve even more.
Management is guiding for 7% to 11% sales growth in Q2 and operating income to increase from $7.7 billion to about $12 billion. It didn't provide full-year guidance, and it will report Q2 results with a Q3 outlook in late July or August.
The average Wall Street consensus for 2024 EPS is $4.55, which represents a 57% increase year over year. Amazon has frequently beaten Wall Street's expectations, and if it comes through this year, it will drive another jump in Amazon stock.
By the end of 2024, expect Amazon to be bigger and better, with more of a focus on AI.
Amazon stock is a no-brainer buy
Amazon stock still offers incredible opportunities for investors. In some ways, it looks like it's just getting started, or at least entering a new chapter that could lead to important changes in its business. But you don't need to bet on AI to feel confident in Amazon's future. There's so much else Amazon is doing right. Keep in mind that buying Amazon stock includes investing in AI, but the difference between Amazon and many other AI companies is that even on the small chance it doesn't work in its favor, Amazon will just get up and move onto the next thing. It's had failures in the past, but it keeps going. With Amazon's tremendous assets, strong lead in several businesses, and ongoing growth drivers, there's plenty to be excited about.
That's how Wall Street sees it, too. An estimated 95% of 65 covering analysts call it a buy, with an average target price 13% higher than today and a high of 86% over the next 12 to 18 months.
It's important to remember that there are no guarantees, and investing in the future is always an unknown. That's another reason Amazon is a compelling buy -- Amazon has an excellent track record, which makes it low risk. Most investors can find a place for Amazon in their portfolio, and it should keep climbing for the rest of 2024.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Jennifer Saibil has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon. The Motley Fool has a disclosure policy.
