The ‘Magnificent Seven’ stock group consists of US technology stocks that have grown at a pace that easily exceeds the S&P 500 over the past decade, but especially in 2023 and 2024. These stocks are large, fast-growing companies that have made virtually many investors tons of money.
I discuss it in this article Amazon.com Inc. (NASDAQ:AMZN) the Magnificent Seven stock that I’m watching with the intention of buying on a 10% dip. This is why.
Sales growth
Amazon’s five-year history is an example of its high growth period. For example, revenue rose 65% to $638 billion in the five years ending in 2024. Net income also rose 178% to $59 billion over the same period. Finally, cash flow from operations increased 75% to $116 billion. In Amazon’s latest quarter, sales and profits continued to rise steadily. Revenue rose 12% to $167.7 billion, and operating income rose 35% to $18.2 billion.
Over the past decade, Amazon’s stock price has risen more than 590% to its current price of $216.48. But year to date, the stock is down 2%. This is likely driven by macroeconomic concerns as well as Amazon’s increasing capital expenditures. While both concerns are valid, I believe the long-term outlook for Amazon and its stock remains extremely bullish.
Growth opportunities at Amazon
Amazon’s core e-commerce business continues to perform well, with this year’s famed Prime Day being the largest ever. Growth here will depend on the company continuing to improve its network, making it faster and more efficient. Amazon is already delivering to Prime members faster than ever. The company is working to improve this further while also working on faster deliveries to smaller towns and rural communities.
Growth also continues to exceed expectations in Amazon’s advertising activities. In fact, ad revenue rose 22% to $15.7 billion in the second quarter. With Amazon, advertisers have great access to consumers, making advertising with Amazon a high return on investment proposition.
Finally, Amazon Web Services (AWS) is Amazon’s cloud computing services. It is the area with the highest growth profile and the area that receives the most investment dollars from the company. In the latest quarter, AWS revenue rose 17.5% to $30.9 billion. Today, the segment operates with annual revenues of $123 billion. There is a lot of hype for this segment, which has high operating margins of 33%. In fact, management has said that AWS is seeing more demand than the company can currently handle.
Amazon exceeds expectations
Reflecting the strong performance Amazon continues to deliver, we can look at its strong record of exceeding expectations. Over at least the past eight quarters, the company has exceeded earnings per share (EPS) expectations by an average of 27%.
Still, the stock price has been quite weak over the past year, despite many studies documenting the strong correlation between positive earnings surprises and stock price performance.
The bottom line
Amazon stock isn’t cheap, trading at 32 times this year’s consensus estimate and 28 times next year’s. The associated growth figures are good. This year, profits are expected to grow 22%, and 14% next year. But it’s AWS’s long-term growth that is the most exciting part of Amazon’s story.
I’m keeping an eye on the stock with the intention of buying if and when it drops 10%.
#buy #beautiful #share #dip