With a market capitalization of $1.8 trillion and 2023 net sales of $575 billion, Amazon (AMZN 3.43%) is one of the most successful enterprises on the face of the planet. It has its hands in various consumer and business-facing markets, representing how powerful the company has become.
Shares have skyrocketed 907% in the last 10 years. But I don't think you missed the boat just yet. Here are two must-know reasons you should buy this FAANG stock like there's no tomorrow.
Dominating in multiple industries
The first and perhaps most obvious reason that investors should rush to buy shares of this tech behemoth is because of how dominant it is. And in Amazon's case, it's a leader in multiple industries, something that puts this business in a league of its own.
The company's bread-and-butter segment remains its sprawling e-commerce marketplace, which had a whopping 4.5 billion visitors to its website in the month of January. Combining both online stores and third-party seller services, this division raked in $114 billion in sales in the fourth quarter of 2023. Despite macro headwinds, that figure was up 13% year over year.
According to Statista, 38% of all online spending in the U.S. goes to Amazon, well ahead of Walmart, which is in second place with a 6% share. As e-commerce activity continues to chip away at brick-and-mortar shopping in the decade ahead, it's hard to find a bigger beneficiary than Amazon, thanks to its huge logistics footprint that provides fast and free shipping on millions of items.
Management successfully figured out another lucrative way to monetize all the activity on the e-commerce platform. I'm talking about advertising. This might surprise most people, but Amazon generated $46.9 billion in digital ad revenue in 2023, up from $37.7 billion in 2022. As shoppers visit the site with purchase intent, Amazon is able to effectively serve up targeted ads.
Amazon purchased MGM Studios for $8.5 billion in 2022, beefing up its content production capabilities. This has propelled Prime Video to become one of the most popular streaming options out there. Data from Nielsen shows that this service is behind only Netflix and YouTube when it comes to TV viewing time in the U.S.
And even though it's a leader in the media and entertainment industry, Walt Disney and its Disney+ and Hulu offerings are below Prime Video in these engagement metrics. This indicates how successful Amazon has become in the streaming landscape, giving it another growth engine.
With all the attention going to artificial intelligence (AI) in the past year or so, investors are likely familiar with Amazon Web Services (AWS), the company's cloud services division. AWS commands about one-third of the worldwide industry's revenue, well ahead of rivals Microsoft Azure and Alphabet's Google Cloud.
With the industry set to experience rapid growth in the decade ahead, AWS is in a prime position to capture a lot of the gains. The need for businesses to incorporate AI capabilities will also help AWS maintain its lead. And because of its stellar Q4 2023 operating margin of 29.6%, it can lift profitability for the overall company.
Not an expensive price tag
This stock has been a massive outperformer in the past, and it's up 108% since the start of 2023. However, trading at a price-to-sales (P/S) ratio of 3.2, the shares don't look expensive right now for prospective investors. That's in line with what it was four years ago prior to the onset of the coronavirus pandemic. And it's about in line with the stock's trailing-10-year average P/S multiple.
Given that Wall Street analysts forecast revenue and operating income growth of 11.4% and 34.7%, respectively, over the next three years, now is still a wonderful time to scoop up shares in this top business.
