Amazon’s stock has seen significant gains this year but is still trading below its estimated fair value. Despite a 22% increase year-to-date, the stock has underperformed the S&P 500 in previous years. With a volatile return history, the company faces uncertainty in the current economic environment, raising questions about its future performance. However, the Trefis High Quality Portfolio has consistently outperformed the S&P 500, signaling a possible strategy for investors to consider.
In its first quarter of 2024, Amazon exceeded street expectations with a 13% increase in net sales to $143.3 billion. Growth was observed across its North America, International, and Amazon web services divisions, leading to a favorable operating margin of 8%. Despite this positive performance, a decrease in total non-operating income impacted the bottom line. Overall, net income surged from $3.2 billion to $10.4 billion, showcasing Amazon’s overall financial strength.
For the fiscal year 2023, Amazon reported a 12% year-over-year increase in revenue to $574.8 billion. Driving this growth were its North America, International, and Amazon web services segments, with a significant rise in operating income due to decreased operating expenses. Other income also saw a notable increase, resulting in a net income of $30.4 billion, a significant improvement from the previous year. Despite fluctuations in other income due to marketable equity securities valuation, Amazon showed strong financial performance overall.
Looking ahead, Amazon expects second-quarter sales to range between $144 billion to $149 billion, with overall revenue expected to reach around $641.4 billion in fiscal year 2024. Adjusted net income margins are projected to improve, leading to a net income of $43 billion and revenue-per-share of $61.48. With a P/S multiple below 3.5x, the stock is estimated to have a fair value of $213, indicating potential upside for investors.
As the economic climate remains uncertain, analysts question whether Amazon will continue to outperform the market or face challenges similar to previous years. The Trefis High Quality Portfolio, known for its consistent outperformance, serves as a model for investment strategies in a volatile market. With a focus on quality stocks that deliver strong returns with lower risk, this portfolio could be a blueprint for investors navigating the unpredictable market conditions.
In conclusion, Amazon’s stock has shown strong growth and financial performance, with positive outlook for future sales and earnings. Despite trading below its estimated fair value, the company’s consistent growth in key segments bodes well for its long-term prospects. As investors weigh the risks and opportunities in the market, strategies such as the Trefis High Quality Portfolio offer a potential path to outperformance and stability in uncertain times.
