You know Amazon (NASDAQ:AMZN) as an e-commerce giant and perhaps as a pioneer in cloud computing via AWS. What you may not know is that Amazon has a whole host of growth levers under the hood that most investors know little, if anything, about.
Collectively, they have the potential to boost Amazon’s share price a lot, and by how much we’ll investigate. Here are five of the least well-known, yet powerful growth engines:
1. Amazon Pharmacy
Launched without much furore in November 2020, Amazon Pharmacy has the ambitious goal of capturing market share in the $300+ billion pharmacy market.
The key to the growth stems from Amazon’s acquisition of PillPack a couple of years prior which afforded it the license it needed to operate in numerous states.
The big idea was that pharmacy sector pricing is famously opaque, and Amazon could leverage its brand name among consumers to level the playing field so to speak. Amazon’s scale and capabilities in logistics were two additional factors that could support its goal to disrupt the legacy players in the sector.
2. Amazon Business
Amazon Business is a lesser known segment but it’s quite the revenue-generator all by itself. Although it launched only 8 years ago, it is already responsible for as much as $35 billion in revenues and forecasts are as high as $80 billion by 2025.
The division of Amazon serves B2B customers, whether for procurement solutions, data analytics, or simply pricing and selection.
To give you a sense of how impressive its growth has been, Amazon Business hit $10 billion in sales faster than Amazon Web Services.
3. International Expansion of Amazon Fresh and Whole Foods
The global grocery market is estimated to reach $12 trillion this year and Amazon has its eyes set on it.
The first forays into the market started with Amazon Fresh and its Whole Foods acquisition. Nowadays, consumers enjoy Prime discounts at Whole Foods, in addition to savings on regular items.
What few investors know is Amazon is not only looking to consolidate its share of the US grocery e-commerce market, but is expanding internationally, too, in geographies as far afield from its Seattle headquarters as India.
4. Project Kuiper
Project Kuiper is Amazon’s plan to launch 3,236 low Earth orbit satellites to provide broadband internet coverage across the globe.
The thought process behind this project is, in part, to expand the company’s reach. If Amazon can expand the audience it serves, it can grow its customer base.
Further, it has the potential to create a new, sizable revenue stream through subscriptions.
Where Project Kiuper could run into trouble in establishing a global broadband market is that it will be competing against SpaceX’s Starlink, a formidable competitor.
5. Custom Manufacturing & 3D Printing
Imagine a world where you could order custom parts or tools, well Amazon already has. For some time it’s been filing patents related to manufacturing-as-a-service, indicating a move towards offering custom manufacturing and 3D printing services.
The potential for this service is truly enormous. Imagine customers were not limited to buying products Amazon offered but could order custom-built product that consumers conceived. If realized, it has the potential to significantly disrupt traditional manufacturing and logistics while creating a new, high-margin revenue stream.
So what does all this mean for Amazon’s share price?
Can Amazon Stock Double?
Amazon stock could double if it can successfully execute on its lesser known initiatives such as Amazon Pharmacy, Amazon Business, Project Kuiper, and manufacturing-as-a-service.
Analysts are also positive on the prospects for Amazon. The consensus forecast is for Amazon share price to rise to $168 per share.
With its enormous balance sheet cash reserves powering new initiatives, Amazon has been reaping the rewards of its under-the-radar growth levers, as well as its core business segments, reporting year-over-year revenue growth of 10.8% last quarter.
Only one other time in the last seven quarters did Amazon manage to hit double-digit percentage quarterly growth year-over-year.
Even more impressively, the revenue growth was accompanied by the highest operating income since Q2 2021, and came in at $7.6 billion.
We should highlight that this quite a rare feat. In the past 20 quarters we analyzed, only 4 other times did Amazon report higher operating income, and it was primarily in 2021 when lockdowns could be attributed to demand spikes.
Notably, Amazon share price has been on a tear this year, already up 63%, way outperforming other technology titans like Apple and Microsoft, neither of which performed poorly this year.
In the last month alone, Amazon has outperformed the market as a whole by a large margin. AMZN share price is up by almost 4% whereas the market is down by over 1%. That type of relative outperformance (5% in a single month) is precisely what you want to look for when you’re considering where to allocate your capital.
Generally, stocks that are strong get stronger. As hedge fund shorts have learned to their peril in the past, betting against a very well-capitalized firm like Amazon is, more often than not, a losing game. Certainly, Andy Jassy’s firm has and will have periods of underperformance but they are rare and fleeting.
To see Amazon’s revenue growth accelerating in recent quarters is precisely the type of financial win you want to be tethered to, especially if the market has a seasonal bullish run into the end of the year.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.