Amazon is off to a good start in 2024. The e-commerce giant's stock has up 66% in the past year as it grows across all areas. It may not be obvious that it's below all-time highs. However, Amazon stock is anticipated to rise above that in the future months, making this a good time to invest. Three particular reasons to be optimistic about Amazon stock this year.
1. Better processes boost e-commerce revenues. Last year, Amazon strategically restructured its distribution network from national to regional. The reason was that the national network was huge and complicated, making product delivery slower on average. A regional network with popular commodities would deliver merchandise faster and cheaper.
Results from its eight regional distribution hubs speak for themselves. Amazon overnight deliveries increased 65% in the 2023 fourth quarter. CEO Andy Jassy said Amazon gets more orders because it serves them faster.
Amazon has reduced its global fulfillment cost per unit for the first time since 2018, and in the U.S., it has dropped by almost $0.45. Amazon can grow its variety profitably at reduced average selling prices, increasing its market share possibilities.
2. AI powers AWS Amazon Web Services (AWS) provides cloud services. AWS sales typically grew 35% each quarter until recently. That dropped as inflation rose and clients decreased spending. Statista reports that Amazon leads the sector with 32% of the market, and fourth-quarter sales growth was 13% year over year. The business announced new collaborations with Salesforce, BMW, and Nvidia, and Jassy said larger transactions are accelerating.
The startup built a sophisticated portfolio of AWS generative AI services, which are popular. The top layer is a generative AI "coded companion." The firm offers three levels of AI to fit clients' demands, from fully configurable to somewhat customizable. Amazon unveiled Rufus, a personal shopping generative AI app, last week. It answers consumer questions and recommends products.
Amazon will spend extensively in AI because it can improve the buying and processing experience for its consumers and provide a multibillion-dollar opportunity over the next several years, according to Jassy.
3. Advertising is booming. Amazon began breaking out advertising as a business sector in late 2021, when it increased 32% year over year, lagging AWS at 40%. Advertising is the fastest-growing reporting category, up 26% in the 2023 fourth quarter as other companies decline. Sponsored adverts drove that. Amazon's hundreds of millions of Prime subscribers and other customers make advertising a no-brainer for third-party retailers. Amazon uses its best AI to accurately target shoppers.
Amazon, like Netflix and Walt Disney, switched to ad-supported streaming, which could boost this category. Amazon will undoubtedly continue to do well in this area, and advertising may spend more following inflation-induced decreases. Amazon will receive a portion.
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