But while the market has been hot this year, with the S&P 500 continuing to hit new records, not all of the “Magnificent Seven” stocks have been doing that well. As of Oct. 30, the worst-performing stock of this group was Amazon, whose year-to-date return as of that date was less than 2%. It has moved higher since then, as it reported quarterly results, but it remains one of the worst performers among the Magnificent Seven this year.
Could now be the ideal time to invest in this growth stock?
Strong earnings gave the stock a boost
Up until it reported earnings on Oct. 30, investors seemed unimpressed with Amazon this year. Other companies, such as Nvidia and Alphabet, have been seeing more direct gains and opportunities related to artificial intelligence (AI), and that has captivated investors. Nvidia’s chips, for instance, are crucial in the development of advanced AI chatbots. Meanwhile, Alphabet has a chatbot in Gemini, which is helping to transform the company’s products and services.
Amazon is investing in AI, but the results may not be as flashy or exciting.
Last week, Amazon reported a 13% increase in net sales, to $180.2 billion for the period ending Sept. 30. The company beat analysts’ expectations for revenue and earnings per share, and its cloud business, Amazon Web Services, also generated $33 billion in revenue, which was higher than analysts’ estimates of $32.42 billion.
The tech company also recently announced it would be cutting 14,000 jobs, which should improve the bottom line even further. Amazon, however, says that the move has more to do with culture and fit. With around 1.5 million employees as of the end of last year, it’s a relatively modest reduction for the tech giant overall.
The stock is trading at historically low levels
It wasn’t all that long ago when investors had to pay a massive premium for Amazon’s stock. But as its earnings have risen and the stock’s gains have been nominal, its valuation has improved and become much more attractive. Here’s a look at the stock’s price-to-earnings (P/E) multiple over the past decade.
At a P/E of 34, it’s still more expensive than the average stock on the S&P 500, which trades at 26 times its earnings, but the premium is much more modest these days than it was in the past. For investors, it could symbolize an opportunity to buy while the valuation isn’t bloated.
NASDAQ: AMZN
Key Data Points
Why Amazon looks like a no-brainer buy
Amazon has a hugely successful and growing business, one that looks to be in fantastic shape to benefit from the opportunities in AI. It’s a promising long-term investment to hang on to that the market may have been overlooking recently. But that’s great news if you want a good stock to buy and hold, as Amazon has tremendous potential to get even bigger in the long run, as it is targeting many different growth opportunities in healthcare, groceries, and AI.
Buying Amazon stock today could be a move you thank yourself for making in the future.
