6. Amazon.com Inc (NASDAQ:AMZN)
Analyst upside as of November 11, 2024: 14%
Amazon.com, Inc. (NASDAQ:AMZN) is one of the best predictive analytics stocks to invest in. The technology company is an e-commerce giant that also provides streaming and data cloud services.
Amazon Web Services, its proprietary cloud platform, is a leader in predictive analytics. Users can leverage predictive analytics solutions on AWS to garner insights into consumer behavior and use them to predict future decisions and customer patterns. At AWS, users enjoy free and real-time access to data no matter where it is stored or originally placed. In addition to that, businesses can also make data-driven decisions by making the data available to the right people at the right time.
For predictive analytics use cases, Amazon.com, Inc. (NASDAQ:AMZN) leverages machine learning to offer deep insights into data on AWS Analytics. In addition to that, AWS offers built-in machine learning integration to facilitate the creation, training, and deployment of ML models.
Overall, in the third quarter of 2024, AWS grew its sales by 19% year-over-year to $27.5 billion. The growing use of AI and advanced data capabilities have been fueling AWS’s position, which explains its revenue growth. Analysts are also bullish on the stock and their median price target of $235 represents an upside of 14% from current levels.
Alphyn Capital Management stated the following regarding Amazon.com, Inc. (NASDAQ:AMZN) in its Q3 2024 investor letter:
“Amazon.com, Inc.’s (NASDAQ:AMZN) continued growth is driven by its strong performance in AWS and advertising, which grew 19% and 20%, respectively. E-commerce growth moderated to 9.3%, likely due to softer consumer demand.
In previous letters, I mentioned how Amazon’s heavy investments in logistics and fulfillment suppressed margins for some time, but the company is now reaping the rewards of those earlier expenditures. European operations have been profitable for the second consecutive quarter, while North American operating margins have risen from pandemic lows to 5.3%. A key ongoing area of focus for Amazon has been reducing the “cost to serve”; this is beginning to show tangible benefits. In 2023, Amazon undertook a “regionalization” strategy, which divided the U.S. into eight distinct regions for fulfillment and transportation, with corresponding distribution centers in each. As I learned from an expert interview done by InPractise, “regionalization” has resulted in estimated shipping expenses dropping from $4.76 per unit to $4.50, and they are now approximately $4.26, with potential reductions of 2-3% annually. Interestingly, Amazon leaned on its third-party vendors (3P) to finance much of this strategy. It did so by requiring 3P vendors ship inventory to the multiple regional distribution centers, instead of to a single location as they used to do. Moreover, Amazon imposed penalties for failing to meet strict minimum and maximum quantities. In this way, Amazon used 3P inventory to expand its distribution capacity by around 24 million square feet, much of which it could use for its own 1P inventory. Clever strategy, but one wonders if this raises the risk of an eventual vendor backlash due to the added financial and logistical pressures on 3P sellers.
Like Alphabet, Amazon is investing heavily in its AWS infrastructure to support its growing AI business. In the first half of the year, the company spent $30.5 billion on capital expenditures, with plans to exceed that in the year’s second half. When questioned about this during the earnings call, CEO Andy Jassy emphasized that they are seeing significant demand for AI-related services, which he believes will become a “very large” business for Amazon.”
