Invest in This Outstanding Growth Stock Using a $1,000 Budget Instantly
After a 24% surge last year and a 27% climb in 2024 (as of Dec. 16), the S&P 500 is now in uncharted territory. This has been fantastic news for investors who've already invested, but it might be disappointing for those who haven't jumped in yet.
But I don't think there's any need to fret. Plenty of enticing investment chances are still out there. In fact, here's a dominant tech titan that seems like the perfect growth stock to invest in with $1,000 at this very moment.
Discovering countless ways to expand
Companies that show promising growth prospects typically prosper in environments that are favorable to them. However, it's Amazon, the tech behemoth (AMZN -0.86%), that excels in this regard. This business boasts numerous long-term trends working in its favor, making it an excellent growth stock.
Perhaps nothing captures investor interest quite like Amazon Web Services (AWS), the preeminent cloud computing platform. During the last quarter, AWS reported revenue growth of 19% year-over-year, which continues a sequence of solid double-digit increases.
The advancements in artificial intelligence (AI) and the eagerness of numerous businesses to incorporate this technology is also propelling AWS forward. AWS provides various AI tools and services. This makes the platform indispensable to its clientele, as they will continue to rely on AWS more and more as time passes.
Every investor recognizes that Amazon has long ruled the e-commerce industry. It shifted from selling only books online to now offering automobiles on the marketplace. Given that physical retail still accounts for 84% of commerce in the U.S., there is certainly ample room for Amazon to continue growing its presence in this sector.
Investors might not be aware that Amazon generated $14.3 billion from ad services in the third quarter. That figure represented a 19% increase compared to the third quarter of 2023. According to Grand View Research, the global digital ad market is set to expand at a 15.5% annual growth rate throughout the remainder of this decade, giving Amazon another growth engine.
Amazon has consistently impressed investors by finding new ways to boost its sales. However, the company has recently been improving its earnings at an impressive pace, thanks to management's relentless focus on keeping costs in check. Operating income surged 55% to $17.4 billion during the last quarter.
Competitive advantages
Newer, faster-growing enterprises often catch investors' eyes. But these companies usually lack any enduring competitive advantages. Once again, Amazon outperforms in this category. It possesses traits that enable it to counter the risk of disruption.
The first significant advantage comes from the company's expansive scale, which results in cost advantages. Amazon's extensive logistics network, coupled with the vast volume of products it sells, leads to lower shipping costs. In other words, its revenue is so high that it can better utilize the considerable investments it makes in its supply chain.
Amazon also gains from positive feedback loops throughout its entire sprawling business empire. "When we win an Emmy, it helps us sell more clothes," founder Jeff Bezos said in 2016.
He's referring to how the success of the company's streaming service, Amazon Prime Video, could lead to more Prime members. And once they realize the other advantages that come with being a Prime member, these consumers will start spending more on Amazon.com. This, in turn, could result in increased ad revenue. It's a powerful virtuous cycle.
Amazon's valuation
In the past two decades, Amazon's stock has soared 11,260%, outperforming broader market indexes by staggering margins. And the current market cap is a staggering $2.4 trillion. I wouldn't blame you if you think it might be too late to join in on the action.
However, a glance at the valuation suggests it might not be too late. At this point in time, the stock can be purchased at a forward price-to-earnings ratio of 45.4. Given that consensus analyst estimates predict earnings per share will increase at a 37.6% annual rate between 2023 and 2026, Amazon still appears to be a smart investment opportunity today that justifies paying that valuation.
In terms of finance and investing, this text highlights Amazon as an excellent growth stock to consider, with its forward price-to-earnings ratio of 45.4, despite its significant market cap. With its strong performance in areas like cloud computing, e-commerce, and ad services, as well as its competitive advantages, Amazon still presents a potential investment opportunity for those who have not yet jumped into the market.
