Amazon.com, Inc. (NASDAQ:AMZN) closed around $186 on October 31st, surging 10% this month. Despite the Dow’s record-breaking rally, the powerhouse blue chip stock continues to hold promising upside potential. Let’s take a look.
The company started November 1st by posting better-than-expected earnings, bolstering investor confidence. Not only did the company demonstrate solid results, but it also proved that it can balance substantial AI spending along with profit growth, something many other companies have been struggling with. It reported earnings per share of $1.43, a dramatic 52.1% increase year over year. Revenues reached $158.9 billion, marking an 11% growth compared to the previous year, while operating income reached a record $17.4 billion, surging 56% year over year.
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Meanwhile, its profit jumped more than 50% to over $17 billion in the third quarter, and its 11% operating margin came in above Wall Street’s expectations of just over 9%. CEO Andy Jassy’s bullish comments about the company’s AI business further fueled investor optimism. AWS reported a 19% increase in sales to $27.5 billion, the quickest pace of growth in seven quarters for the cloud business.
Moreover, Amazon is fully reaping the benefits of the shopping season. Deepwater Asset Management’s Gene Munster notes how Amazon’s shift in focus from Cyber Monday to Black Friday has proven effective for the business. By making a move that aligns with Amazon’s tradition of creating its own sales events, such as Prime Day, Munster estimates that it has improved retail operating margins from -3% two years ago to +5% this quarter. This profitability could grow to 7% in 2025, significantly boosting earnings per share.
According to Adobe, consumers spent a record $6.1 billion online on Thanksgiving, up 8.8%. Moreover, Amazon started offering Black Friday discounts starting Nov. 21, eight days early. Wedbush Securities analysts stated that the short shopping window would give Amazon an advantage over other online retailers, given its speedy delivery times.
Amazon has also invested $4 billion in AI startup Anthropic, underscoring its commitment to advancing generative AI technologies and solidifying its leadership in tech innovation. All in all, the holiday season has proved to be a game-changer for the stock, and analysts have also been raising price targets and predicting continued growth. A top analyst at JPMorgan Chase even highlighted that E-commerce giant Amazon (AMZN) is investors’ best bet for the year-end holidays.
While we acknowledge the potential of AMZN as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than AMZN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.