We recently compiled a list of the 10 Most Promising Future Stocks According to Analysts. In this article, we are going to take a look at where Amazon.com, Inc. (NASDAQ:AMZN) stands against the other Most Promising Future Stocks According to Analysts.
Rising Market Volatility
Volatility in the equity markets is poised to hit levels not seen for the better part of the year as investors battle a string of developments. The uncertainty around the upcoming US elections and the soaring geopolitical tensions in the Middle East are the latest headwinds sending shockwaves in the market.
A report by MarketWatch indicates that October could turn out to be a spooky month for equities as valuations appear overstretched, with major indices at all-time highs. Analysts are no longer ruling out the prospects of a market crash given that recession fears are rising even though inflation levels have dropped significantly, prompting the Federal Reserve to cut interest rates.
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While expectation is high that the US economy will achieve a soft landing on higher interest rates, leading to lower inflation without causing a major hit to the economy, Michael Darda, chief economist and macro strategist at Roth Capital Partners, is sounding warning bells.
The economist maintains we are marching on ice that’s a bit thinner, depicted by rising unemployment and elevated earnings expectations that triggered market routes in August and September.
“It’s not unprecedented to have a slowdown period that looks like a soft landing, and then a recession ends up taking shape,” he said. “That’s sort of unexpected now because many have been lulled into this idea that the soft landing is going to be a permanent state of affairs for the business cycle. Equity market valuations reflected that coming into the summer.”
“But there’s been some cracks in the business cycle,” he cautioned, noting expectations for the economy, corporates, and the stock market have remained at “super high” levels.
A slowdown in the US economy amid the high interest rate environment comes amid a highly charged election that threatens to rattle the stock market. While indices are at all-time highs at the back of one of the longest bull runs, the prospects of a deep pullback are growing as investors become more cautious ahead of the election.
While the US stocks have often rallied following a major US election, Former Goldman Sachs partner Abby Joseph Cohen believes things could turn around this time around.
“Historically when you go back many cycles you see that the US stock market does pretty well after a major election. There is a sigh of relief and also most people feel that their candidate has won. This year aim not convinced it is going to be a sigh of relief rally. In fact if anything I am quite concerned about what happens if there is agitation of any sort following the election because of uncertainty about results,” Cohen said.
Although there is a good chance that the US stock market will crash this time, many analysts are also saying that things might improve following a very bad September that also saw premium stocks like the S&P 500 plummet and hit all-time lows.
AI-related firms continue to drive market gains, with the S&P 500 up 21% year-to-date. Howard Chan, CEO of Kurv Investment Management, highlighted the importance of monetizing AI initiatives, noting Meta’s share price surge due to strong sales growth.
Analysts are increasingly focusing on promising future stocks, particularly those in advanced technologies, which are expected to withstand short-term pressures and deliver long-term value. Investing in industry leaders with a competitive edge and a strong track record of revenue and earnings growth, combined with low interest rates, is seen as a strategy likely to yield significant returns. Despite market volatility, certain stocks continue to offer substantial opportunities and the potential to generate significant long term value.
Pixabay/ Public Domain
Our Methodology
To make our list of the most promising future stocks to buy according to analysts, we made a list of 40 stocks with market capitalization greater than $10 billion, significant average analyst share price percentage upside, and an average rating of Buy or better. They were then ranked in ascending order based on analyst’s upside potential, and the most promising future stocks are as follows.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders as of Q2: 308
Analyst Upside as of October 10, 2024: 20.45%
Amazon.com Inc (NASDAQ:AMZN) is a market leader in cloud computing and e-commerce retail, affirming its long-term growth prospects. The company generates a significant chunk of its revenues from e-commerce, with a market share of 37.6%.
Cloud computing is increasingly becoming an essential piece of the puzzle amid artificial intelligence, as the company has a market share of 31% in the multibillion-dollar industry. The segment posted an 18.8% revenue increase in Q2 and has reported 30% plus operating margins consistently for the past five quarters.
Likewise, Amazon.com Inc (NASDAQ:AMZN) is diversifying its operations into the fiercely competitive streaming service ad-supported market. As the US tech giant intensifies its push into ad-funded streaming services, it plans to introduce more ads across its popular TV series and films on Prime Video in the upcoming year.
By the end of the year, Amazon is expected to have $127.4 billion in cash and short-term investments, which will be three times its 2018 total. It is also expected to have nearly $400 billion in cash by 2027, far exceeding its competitors in the Big Tech sector.
This is an incredible transformation for a business known for operating on thin margins, reinvesting most of its profits, and having comparatively little cash compared to its peers.
Record profits from cloud computing, advertising, and increased efficiency, including cost reduction, are the main drivers of Amazon.com Inc (NASDAQ:AMZN) ‘s cash increase. S&P Global Market Intelligence estimates that the company’s free cash flow will almost double from $36.8 billion last year to $70.8 billion in 2025.
After other tech companies like Alphabet and Meta began giving back more of their cash to shareholders earlier this year, there was a surge in hopes for an Amazon.com Inc (NASDAQ:AMZN) dividend or at least more share buybacks in recent quarters. Likewise, analysts on Wall Street rate the stock as a Buy with an average price target of $222.95, implying 20.45% upside potential from current levels. According to our Insider Monkey database, AMZN was held by 308 hedge funds at the close of Q2 2024 with total stakes amounting to $65.85 billion.
Meridian Hedged Equity Fund stated the following regarding Amazon.com, Inc. (NASDAQ:AMZN) in its Q2 2024 investor letter:
“Amazon.com, Inc. (NASDAQ:AMZN) is a global technology company that operates e-commerce, cloud computing, digital advertising, and other businesses. We own Amazon because we believe it is well-positioned to benefit from several strong secular trends, including the shift to online shopping, the growth of cloud computing, and the increasing importance of digital advertising. The company exceeded expectations in the first quarter, with cloud-computing revenue growth accelerating, driven by easing cost optimization pressures and the ramp of generative AI workloads. The North American retail segment drove record operating margins, highlighting the success of Amazon’s efforts to improve efficiency and lower its cost to serve. International retail also showed promise, as emerging markets steadily progressed towards profitability. Given the strength across these key segments, we continue to hold the position in the company.”
Overall AMZN ranks 8th on our list of 10 Most Promising Future Stocks According to Analysts. While we acknowledge the potential of AMZN as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than AMZN, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
