Tech giant Amazon.com, Inc. (AMZN) continues to remain resilient despite the macroeconomic headwinds of high-interest rates, supply chain challenges, and inflation, thanks to its various efforts to expand its repertoire of services to meet its customers’ changing needs.

AMZN’s CEO, Andy Jassy, said, “There’s a lot to like about how our teams are delivering for customers, particularly amidst an uncertain economy. Our Stores business is continuing to improve the cost to serve in our fulfillment network while increasing the speed with which we get products into the hands of customers (we expect to have our fastest Prime delivery speeds ever in 2023).”

He further added that the company’s Advertising business continues to deliver robust growth, thanks to ongoing machine learning investments that help customers see relevant information while engaging with its products, which in turn delivers unusually strong results for brands.

Due to global interest in cloud services and the disruption they are causing across various sectors, AMZN’s Amazon Web Services (AWS) has played an increasingly important role in the cloud services industry, bringing in a significant amount of revenue for the company.

Although companies are spending more cautiously in this macro environment, AMZN has been aggressively cutting costs to secure its profits and operating income.

AMZN’s stock has fallen marginally over the past month but has gained 53.3% year-to-date to close its last trading session at $128.80. Wall Street analysts expect the stock to hit $145.77 in the near term, indicating a potential upside of 13.2%.     

Let’s have a look at some factors that could influence AMZN’s performance in the upcoming months.

Mixed Financials 

AMZN’s total net sales for the fiscal first quarter (ended March 31, 2023) increased 9.4% year-over-year to $127.36 billion. The company’s net income came in at $3.17 billion, compared to a net loss of $3.84 billion in the prior-year period. Its EPS came in at $0.31, compared to a loss per share of $0.38 in the year-ago quarter.

However, the company’s total operating expenses increased 8.7% year-over-year to $122.58 billion.

Solid Historical Growth

AMZN’s revenue grew at a CAGR of 21% over the past three years. Its EBITDA grew at a CAGR of 16.4% over the same time period. Likewise, its total assets grew at a CAGR of 28% over the past three years.

High Profitability

In terms of the trailing-12-month gross profit margin, AMZN’s 44.73% is 26.9% higher than the 35.25% industry average. Its 11.98% trailing-12-month CAPEX/Sales is 269.8% higher than the 3.24% industry average. Likewise, its 1.20x trailing-12-month asset turnover ratio is 19.5% higher than the industry average of 1.00x.

Stretched Valuation

In terms of its forward non-GAAP P/E, AMZN is trading at 80.99x, 425.5% higher than the industry average of 15.41x. The stock’s forward EV/EBIT multiple of 65.34 is 357.2% higher than the industry multiple of 14.29. Its forward Price/Book ratio of 7.20x is 167.9% higher than the 2.69x industry average.

POWR Ratings 

AMZN has an overall C rating, equating to a Neutral in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 distinct factors, with each factor weighted to an optimal degree.  

Our proprietary rating system also evaluates each stock based on eight distinct categories.  

The stock has a B grade for Growth and Quality, consistent with its solid historical growth and high profitability. However, it has a C grade for Stability, in sync with its 60-month beta of 1.26. AMZN has a D grade for Value, justified by its higher-than-industry valuation.

Within the Internet industry, it is ranked #14 of 58 stocks.    

Click here to access the additional ratings of AMZN for Momentum and Sentiment.

Bottom Line    

Driven by a passion for innovation, boosting the consumer experience, and empowering its employees and partners, AMZN is well poised for significant growth in the long run.

Given the company’s solid financial growth and high profitability, its prospects remain positive. However, amid the current market volatility, AMZN’s lack of stability and its stretched valuation could put it under pressure. Therefore, it could be wise to wait for a better entry point in the stock.

How Does Amazon.com, Inc. (AMZN) Stack Up Against Its Peers?     

While AMZN has an overall POWR Ratings grade of C, equating to a Neutral rating, one may also want to consider these other stocks within the Internet industry with an A (Strong Buy) or B (Buy) rating: trivago N.V. (TRVG), Travelzoo (TZOO), and Despegar.com, Corp. (DESP).  

43 Year Investment Pro Shares Top Picks

Steve Reitmeister is best known for his timely market outlooks & unique trading plans to stay on the right side of the market action. Click below to get his latest insights…  

Steve Reitmeister’s Trading Plan & Top Picks >

AMZN shares were trading at $129.10 per share on Tuesday afternoon, up $0.30 (+0.23%). Year-to-date, AMZN has gained 53.69%, versus a 20.07% rise in the benchmark S&P 500 index during the same period.

About the Author: Malaika Alphonsus

Malaika's passion for writing and interest in financial markets led her to pursue a career in investment research. With a degree in Economics and Psychology, she intends to assist investors in making informed investment decisions. More...

More Resources for the Stocks in this Article