Did you know that until recently, Amazon (AMZN -1.61%) stock was still off of its 2021 highs? Amazon stock last hit a high in July of 2021, almost three years ago. Even though Amazon stock gained 81% last year, it still came into 2024 nearly 20% below its peak.
It finally topped that in April. Can it keep going?
Wait, Amazon stock is down?
Amazon stock sank in the in the previous bear market, and it’s been climbing again since bottoming out last year. It surpassed its previous record in April of this year and hit a new high last week.
Now that Amazon stock is trading at its highest levels ever, is it the time to buy?
Is AI the biggest tailwind Amazon has ever seen?
Amazon stock has hit record highs many times in the past, and has gone on to surpass them by leaps and bounds. Had an investor sold at past highs, they’d have missed out on incredible gains. The new high doesn’t mean the ascent is over — it means investors have strong confidence in Amazon’s potential right now.
The biggest driver of that confidence is Amazon’s is artificial intelligence (AI). Amazon is investing heavily in its AI technology to support Amazon Web Services (AWS) and e-commerce providers. It’s been using AI for decades, but since the launch of ChatGPT and the resultant interest in generative AI, Amazon has unveiled its own high-level solutions. It offers various tiers for every kind of user, from the technology for developers to create their own large language models (LLM) to solutions for non-techies to input their info and create complete web pages, full marketing campaigns, and more. And of course, Amazon uses AI in its own operations. It can pinpoint shoppers’ preferences based on search history and more, offering side-by-side comparisons to help customers make decisions and convert higher sales. It also uses AI in its advertising business, where it offers advertisers perhaps the ideal platform to capture customers where they’re already looking to spend money.
The potential for what AI can do for Amazon’s business is substantial, creating a huge, untapped well of business for Amazon.
There’s everything else
Amazon is a leader in several areas, beginning with its core e-commerce business. Amazon’s lead is so massive, with nearly 40% of total U.S. e-commerce, that it wouldn’t be possible for any competitor to come close in the near future. It also continues to get better as it gets bigger. As it makes faster deliveries, more customers rely on it for more purchases, padding its already-wide moat.
AWS is the largest cloud computing company in the world, with 31% of the market, and it consistently adds new, high-profile customers to the platform as well as expanded deals with current customers. Amazon recently opened a new $10 billion AWS facility in Mississippi and has started investing another $10 billion in Mexico and Saudi Arabia, and it still feels it’s just scratching the surface of the opportunity.
It’s a major player in streaming, complete with its own major film studio. It acquired MGM Studios in 2021. It’s working on developing a healthcare business, and it has several smaller segments that add to the total.
A new high, and more to come
Amazon has a market cap of $1.9 trillion, but investors aren’t worried about it growing even bigger. 62 out of 65 Wall Street analysts rate it a buy right now, with the other three rating it a hold. The average Wall Street consensus price target is for Amazon stock to gain 21% over the next 12 to 18 months, with a high of 94%.
Amazon stock may have reached a new high, but expect even more of that going forward.
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.
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