Where will Amazon stock be in 3 years?

While it can be tempting to bet on flashy, smaller companies, blue-chip giants like it Amazon (NASDAQ:AMZN) could also have a place in your portfolio. While the tech conglomerate is still a long way from rapidly growing revenue, cost reductions and new artificial intelligence (AI) capabilities could still create significant value for shareholders.

Let's take a closer look at what the next three years could have in store for us.

Turn e-commerce into a cash cow

Online shopping has been a part of mainstream American life for decades, making it seem a bit dull compared to other technology options. However, Amazon has exploited this market like no other for decades. Now, the company's e-commerce business is enjoying some exciting trends that could continue to unfold in the coming years.

Second-quarter revenue rose 10% year-over-year to $148 billion, driven by strong e-commerce sales. In recent years, Amazon has dramatically cut costs in its core business by laying off thousands of laid-off employees and shifting its fulfillment strategy from a national network to a more efficient regionalized model.

CEO Andy Jassy has also backed away from riskier ventures like “just walk out” checkout-free shopping and focused on more tried-and-true products TRUE Strategies including self-checkout carts stationary Whole Foods stores.

The realignment has a dramatic impact on Amazon's bottom line. The North American e-commerce segment's operating margin rose 58% year-over-year to $5.1 billion, while international e-commerce swung from a loss of $895 million to a profit of $273 million. Amazon does not break down its profits by country. However, some international markets are likely to be more profitable than others, which is what defines this segment a great one Opportunity for future cost reductions.

Focus on new growth drivers

Amazon's future is not just limited to cost cutting in its e-commerce business. The company has other growth drivers that investors can look forward to. Within the Amazon Prime ecosystem Video streaming has arguably evolved from a loss leadero an importNot a value creator.

According to one Evercore According to a survey, 80% of Prime members watch Prime Video. And it's not hard to see why. The platform is known for popular shows like The boys and expanded live sports offerings such as select NFL and NBA games. And it offers good value compared to popular alternatives, combining video streaming with shopping benefits and discounts at a relatively low price of $14.99 per month. It is a unique package that offers Amazon customers special added value. Netflix And Disney+ Ad-free plans cost $15.99 and $13.99, respectively, and do not include Prime's shopping-related perks.

The story continues

Investors should also not forget Amazon's entry generative artificial intelligence (AI) – a company that helped its Amazon Web Services (AWS) cloud computing segment grow second-quarter revenue 13% year-over-year to $9.3 billion and operating income rise 38% to 7 .2 billion US dollars.

While the AI ​​industry is still extremely speculative, Amazon is protected from some des Uncertainty due to focus on the infrastructure side of the industry with platforms like Bedrock designed to help customers build custom AI algorithms using Amazon's foundational models.

A reasonable review

There's a lot to like about Amazon, and the company's rating is the icing on the cake. With a Forward price-earnings ratio (P/E ratio) multiple of 32, shares are slightly more expensive than that Nasdaq-100 Average 29. However, this premium seems justified considering the company's cost-cutting efforts and the opportunities for future growth in video streaming and AI.

Over the next three years, Amazon could see significant earnings momentum. And its shares are likely to outperform the market.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Will Ebiefung has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Netflix and Walt Disney. The Motley Fool has a disclosure policy.

Where will Amazon stock be in 3 years? was originally published by The Motley Fool