Amazon’s stock (NASDAQ: AMZN) has gained 22% year-to-date, outperforming the S&P 500 index’s 6% rise. However, the stock is currently trading 13% below its fair value of $213, according to Trefis. The increase in AMZN stock has not been consistent, with returns of 2% in 2021, -50% in 2022, and 81% in 2023. Despite this volatility, the Trefis High Quality Portfolio, consisting of 30 stocks, has consistently outperformed the S&P 500 each year over the same period due to providing better returns with less risk.
In the first quarter of 2024, Amazon exceeded street estimates with net sales rising 13% year-over-year to $143.3 billion. The company saw growth in the North America segment (12%), International unit (10%), and Amazon web services division (17%). Operating expenses as a percentage of revenues decreased, leading to an operating margin of 8%. However, total non-operating income decreased, impacting the bottom line. Overall, net income soared from $3.2 billion to $10.4 billion.
For the full year 2023, Amazon’s top-line grew 12% year-over-year to $574.8 billion, driven by growth in North America (12%), International unit (11%), and Amazon web services (13%). Operating expenses as a percentage of revenues decreased, resulting in a 200% rise in operating income. Other income also increased significantly, leading to a net income of $30.4 billion. The company was able to overcome a marketable equity securities valuation loss of $13.9 billion in 2022.
Looking ahead, Amazon expects second quarter 2024 sales to range between $144 billion to $149 billion, with full year revenues forecasted to be around $641.4 billion. The company anticipates an improvement in the adjusted net income margin, projecting a net income of $43 billion and revenue-per-share of $61.48. With a P/S multiple just below 3.5x, Trefis estimates a valuation of $213 for Amazon.
In a volatile economic environment with high oil prices and elevated interest rates, the performance of individual stocks like AMZN may be uncertain. Despite the challenges, Amazon has shown resilience in the market with strong growth in sales and net income. The company’s focus on innovation, expansion, and diversification has helped it navigate through challenges and deliver value to investors.
Overall, Amazon’s stock performance has been mixed in recent years, with periods of underperformance and outperformance compared to the S&P 500. The company’s ability to consistently deliver strong financial results and adapt to changing market conditions will be crucial in determining its future stock performance. Investors will be looking for continued growth and profitability from Amazon as it navigates through the current economic landscape.
