How High Will Amazon Stock Go In 2024?

Amazon.com (NASDAQ:AMZN) is a $1.9 trillion company that has been whipsawed over the past few years. It was marred by moderating performance and layoffs, but the financials have been flourishing more recently.

What prospects await this “Magnificent 7” stock and how high can it go this year?

The Rocky Road Amazon Has Been On

To understand where Amazon is likely going this year, it’s best to look in the rearview mirror and see where it has come from.

When 36 months ago people were sitting inside their homes, needing to buy daily necessities, Amazon capitalized on the spike in demand brilliantly. Thanks to its stable and massive logistics network, the company was able to rise up to meet the enormous increases in consumer demand.

The operational successes paid off in spades when the company posted a net income of $8.11 billion in Q1 2021, an increase of 219.8% from the prior year’s quarter.

From one year to the next between 2020 and 2021, Amazon’s bottom-line growth soared by 56.4%. Management also reported scaling the firm’s fulfillment network and increasing staffing to cater to the pressures on the logistics networks.

As the spike in demand tapered, Amazon was left to face a tough macroeconomic environment and it failed to escape unscathed.

For instance, in 2022, Amazon went into the red to the tune of $2.72 billion, citing a pre-tax loss of $12.70 billion included in non-operating expenses from the common stock investment in Rivian Automotive (NASDAQ:RIVN).

To address the bottom line woes, cost-cutting measures were put front and center and layoffs were announced in an effort to bolster operating margins.

From the tail-end of 2022 and through 2023, Amazon has bid adieu to more than 27,000 employees. Recently, news came out that the cloud computing division is laying off hundreds of employees in its physical stores, technology, and sales and marketing units.

The measures to turn around the bottom line from red to black worked well when a $2 billion plus loss in the prior year gave way to net income of $30.43 billion. Operating income was buoyed by the AWS segment through a total of $24.63 billion, which accounted for 67% of its operating income.

Can Amazon Scale its E-commerce Empire?

Amazon is reigning supreme in the U.S. e-commerce industry. The company is a growth machine, so much so that it’s hard to imagine that it was started in the 1990s as an online bookseller straight out of Jeff Bezos’ garage. Since those modest early day, it has grown to be the world’s most prominent online marketplace by quite some distance.

Last year, the company alone accounted for 37.6% of the U.S. online retail market. This is even more impressive if we consider that Walmart Inc. (NYSE:WMT), which occupied second place, accounted for only 6.4%. The U.S. is Amazon’s most profitable market as well, comprising 69% of its $574.79 billion net sales in 2023.

Amazon’s sales in North America continue to grow, up 11.7% in 2023 alone. International markets, especially emerging ones, remain a growth lever for Amazon. Indeed, net sales in the international division grew by 11.2% last year, so a lot of growth may yet lie on the horizon.

Customer retention is the hallmark of Amazon’s success. Evidence of that is seen in the growth of its prime memberships, a bundled subscription service that offers fast and free shipping among other perks. Subscription service revenue went from $31.7 billion in 2021 to $35.2 billion in 2022 to $40.2 billion last year.

Another hugely successful initiative for Amazon has stemmed from deals on Black Friday and Cyber Monday, in which customers bought more than one billion items on its platform. The combination of these two sales events served also to attract new customers and prime memberships.

Top line sales have been complimented by operational execution, particularly in the firm’s fulfillment network where the company is always working hard to lower costs. The fruits are clear to see as global per-unit cost to serve declined last year for the first time since 2018.

This allows for improvements in the company’s fulfillment efficiency, including speed improvements, and more selection in the average selling price mix. Management has reported that this year the fulfillment architecture is in focus alongside inventory placement.

How High Will Amazon Stock Go In 2024?

According to the 55 analysts who cover Amazon, the share price can rise to as high as $216.63 per share over the next 12 months.

Amazon’s share price has done very well, gaining 63.3% over the past year. For context, the SPDR S&P 500 ETF Trust (NYSEARCA:SPY) gained 20.1% over the same period. The stock is trading just 8% below its 52-week high at the moment.

Looking through the valuation lens, the price sits at 41.7x earnings, which is relatively lofty and yet muted when comparing to the 5-year average of 184.42x.

Peering over the horizon, the introduction of artificial intelligence has picked up pace for the company. Notably, its AI-based shopping assistant, Rufus, is gaining more attention and the company believes generative AI will be the driver of “tens of billions of dollars of revenue” over the next several years. And none of that good news gives a nod to AWS.

The bottom line is that as long as e-commerce continues to grow, Amazon is set to expand due to its unique ability to scale and massive customer loyalty.

As of last year, U.S. e-commerce sales were about 15.4% of total retail sales, while its growth rate was higher than the overall retail sector, suggesting that it continues to enjoy a wide moat that beats the average firm.

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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.