Sun, September 25, 2022

Amazon can make investors richer in August

amazon office

According to the analysts, giant company, Amazon.com has the potential to make investors richer in August.

Last week, an e-commerce firm reported its Q2 operating results and sales growth guidance that didn’t impress Wall Street.

As we know, Amazon’s dominant marketplace has increased in demand over the past 18 months amid the COVID-19 pandemic. During the coronavirus, individuals were staying home in order to reduce virus transmission. Therefore, online orders from customers and businesses have sharply increased. However, some say that Amazon might witness declines as more and more people get vaccinated and the country returns back to normal.

Remarkably, even with the expectation of slower retail sales growth, an e-commerce company is fully expected to dominate U.S. online retail sales market share in 2021. In April, a report from eMarketer projected Amazon for a 40.4% of online sales share in America in 2021. Notably, it is more than 33% points higher than Walmart.

Amazon may hit $10,000 a share by mid-decade

Although retail is Amazon’s biggest revenue driver, it’s actually low on the totem pole when it comes to long-term cash flow generation. Amazon’s other sales channels, such as cloud infrastructure platform Amazon Web Services (AWS), subscription services (e.g., Prime), and advertising, represent significantly higher-margin opportunities for the company. Remarkably, they’ve shown no signs of slowing down.

Sales at AWS increased by 37% year-over-year, with over $59 billion in annual run-rate revenue. Meanwhile, subscription services surged 28%, and advertising sales skyrocketed 83% in the second quarter of 2021.  In short, according to experts, Amazon’s retail sales could weaken. However, they say that its operating cash flow growth may resume accelerating.

Wall Street and investors have been happy paying a multiple of 23 to 37 times Amazon’s year-end operating cash flow for the past 11 years. Wall Street estimates $314 in cash flow per share by 2024. Moreover, According to Wall Street estimates, an e-commerce giant may hit $10,000 a share by mid-decade.

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