The world of investing is always evolving, and 2023 has proven to be no exception. After a year of economic uncertainty, we are now seeing signs of recovery and potential investment opportunities. Among them, Amazon (AMZN) is standing out as a particularly compelling option.
In 2022, Amazon saw a near 50% drop in its share price, reporting its first annual net loss in almost a decade. This was primarily due to rising inflation and a challenging economic environment that affected both Amazon’s e-commerce and cloud computing businesses. The company faced higher costs, from running factories to delivering packages, while customers found themselves with less disposable income. At the same time, a rapid expansion of Amazon’s fulfillment network during the pandemic led to excess capacity when demand fell1.
Despite these challenges, Amazon made significant strides to limit the pressure on its earnings and prepare for better days ahead. Notably, it improved its cost structure, announced a significant job cut, and shifted its fulfillment network to a regional model, which should cut costs and speed up its already fast deliveries. These efforts appear to be paying off. Amazon’s operating cash flow rose 38% to more than $54 billion for the trailing 12 months, and it has significantly improved its free cash flow position1.
Amazon Web Services (AWS), the company’s cloud computing business, continued to grow sales and operating income through most of last year. While its operating income fell this year, Amazon has responded by directing customers towards its least expensive data storage options to maintain loyalty. As customer buying power returns, AWS is expected to benefit1.
Despite the gains so far this year, Amazon’s shares are trading at about 2x sales, which is around the lowest level by this measure since 2016. This, along with Amazon’s leadership in the high-growth businesses of e-commerce and cloud computing, has led some analysts to conclude that Amazon’s shares are still a great investment for long-term investors1.
In addition to Amazon, other companies have been highlighted as potential opportunities for investors. Financial research firm Redburn has identified twelve companies with the potential to double their stock price over the next two to three years. Among those are Danish wind turbine manufacturer Vestas, German pharmaceutical and biotech firm Bayer, and travel tech company Sabre, alongside Amazon2.
In conclusion, while the past year has been challenging for many companies, there are signs of recovery and potential investment opportunities on the horizon. Amazon, in particular, has shown resilience in the face of adversity and appears to be well-positioned for future growth.