Amazon‘s (AMZN) massive growth spurt during the pandemic was followed by a sharp slump, with shares falling 49% last year. But the tech giant has turned it around in 2023, with Amazon stock up 83% as of market open Dec. 26.

buy just about everything. As the e-commerce giant expands its artificial intelligence capabilities, the company is working on new initiatives to help customers do way more than just shop for everyday items. These developments come as e-commerce revenue, which surged during the pandemic, is not generating the high-level gains it once was. The tech behemoth is looking to write the next chapter of its growth story by continuing to invest in new areas and developing other business units.” vid-name=”Why Amazon Is Expanding Into Everything From AI To Auto” vid-cat=”Industry Insights” vid-date=”12/13/2023″ vid-date-tmsp=”1702464542″ vid-image=”https://www.investors.com/wp-content/uploads/2023/12/T5KuDpIj-640×360.jpg” vid-authors=”MEREDITH HEYMAN”>
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The percent gain puts Amazon stock on pace for its best year since 2015. With a market cap nearing $1.6 trillion, Amazon is looking to build off gains this year by establishing leadership in generative artificial intelligence and improving the profitability of its massive online retail operations. But it is also staring down a major battle with the U.S. government.

Meanwhile, a third-quarter earnings report that beat expectations gave Amazon shares a big boost in the final months of 2023. Amazon stock is up 29% since the Oct. 26 report.

So, is Amazon stock a buy? Here’s what to know about recent action from the tech giant’s AMZN stock.

What Amazon Stock Analysts Are Watching In 2024

Can Amazon keep adding to its big gains? Several Wall Streets analysts think so. AMZN stock is on several top pick lists for 2024. That includes at TD Cowen, which named AMZN its top large capitalization stock pick for next year. Analyst John Blackledge wrote in a recent client note that Amazon’s cloud-computing business will be lapping easier comparisons next year. Further, companies are likely moving past efforts seen to cut back on cloud spending. The firm expects Amazon Web Services sales growth to accelerate.

Beyond that, “the launch of ad-supported Prime Video should act as a tailwind to ad revenue growth,” Blackledge wrote. “Finally, we think increased speed of delivery at the retail biz will help conversion rates and unit growth”

Further, Amazon stock is a 2024 “best idea” among internet stocks to analysts at Bernstein. In a recent note, Analyst Mark Shmulik wrote that he expects Amazon’s operating income to reach an inflection point. That will be driven by AWS revenue recovery, the growth of the company’s digital advertising business, increasing leverage for its retail business and cost discipline for big bets outside its core businesses.

Meanwhile, Wedbush named AMZN to its “best ideas” list in August and has kept it there since. Amazon “is well positioned to continue taking share of global digital advertising spending over a multi-year period,” Wedbush analyst Scott Devitt wrote in a recent client note.

But investors will be closely watching how Amazon responds to increased competition from Chinese e-commerce firms, as well as how the company positions AWS for AI business.

On average, analysts have set a 12-month price target of 179.20 for Amazon stock, according to FactSet. That implies 17% upside from AMZN’s closing price on Dec. 22. Still, Amazon stock is not on the list of companies with the highest upside to their analyst target price.

AI Push For AWS

Meanwhile, Amazon recently unveiled a group of new, AI-focused products for its massive cloud computing division, Amazon Web Services. At its annual re:Invent conference in late November, AWS leadership announced a new chatbot for businesses, a deeper partnership with AI chip market leader Nvidia (NVDA), and an update AI chip of its own.

The products made it clear that Amazon is working to defend its lead in the cloud services provider market, which analysts expect will grow as more companies embrace compute-heavy generative artificial intelligence products.

Some background: AWS has the largest market share among cloud providers, by all estimates, and is a key profit driver for Amazon. But investors have been watching the business with some concern for much of the year. For one, revenue growth has slowed as companies cut back on some computing costs.

But more importantly, all eyes on Wall Street are trained on the race to win business from generative AI.

Generative AI: Amazon vs. Microsoft

Microsoft (MSFT), the No. 2 cloud services provider behind AWS, was quicker to embrace generative AI. Just weeks after ChatGPT was introduced late last year, Microsoft reportedly agreed to invest $10 billion as part of a strategic partnership with OpenAI, the startup behind the wildly successful chatbot that unleashed the ongoing AI frenzy.

But Amazon has pushed back on the narrative that it is chasing Microsoft on AI. The company’s re:Invent conference underscored this.

“The conference and the plethora of new product innovations from AWS continue to support its role as a leader in the (cloud services provider) market, with the company making a clear push to take back the narrative on GenAI—where Microsoft had the clear early lead at the beginning of this year,” wrote William Blair analysts Dylan Carden and Arjun Bhatia in a client note following the conference.

Amazon announced Q, a chatbot that can answer questions, generate text and take other actions. The company said AWS will be the first cloud provider to launch services with Nvidia’s new GH200 Grace Hopper processors next year.

Amazon Stock: Previous Deal With AI Startup

The AWS conference is not the first time Amazon has talked-up its AI efforts. In September, Amazon struck a deal to invest up to $4 billion in Anthropic, a rival to ChatGPT-creator OpenAI. In April, the tech giant launched Amazon Bedrock, a service that allows users of Amazon’s AWS to build generative AI applications.

Amazon Chief Executive Andy Jassy spent significant time on the company’s third-quarter earnings call in October highlighting the company’s progress in building AI products for its cloud clients.

“In our best estimation, the amount of growth we’re seeing and the absolute amount of generative AI business we’re seeing compares very favorably with anything else I’ve seen externally,” Jassy said.

But it is still early in the battle for the generative AI market, so Amazon stock analysts will be watching the company’s progress closely.

Kicking Off Holiday Shopping

Elsewhere, Amazon said its e-commerce business just recorded its “biggest ever” holiday shopping kickoff, although the company did not disclose exact numbers.

In a news release after Cyber Monday, Amazon said customers purchased more than 1 billion items from Nov. 17 through Nov. 27 — the 11 day period the company considered its extended Black Friday and Cyber Monday event.

Meanwhile, Adobe Analytics estimated online shoppers spent a record $9.8 billion on Black Friday across all websites. That marked a 7.5% increase from last year. Cyber Monday sales climbed 9.6% year over year to $12.4 billion, according to Adobe.

That’s good news for investors hoping to see a big quarter from Amazon’s “Everything Store.” Last year, Amazon saw its fourth-quarter e-commerce sales for 2022 fall 2.3%, year over year, to $64.5 billion.

Sales have bounced back this year. The company’s e-commerce sales category — which it calls online stores — recorded $161 billion in revenue through the first nine months of 2023, up 4% from the same period last year.

Amazon stock analysts polled by FactSet expect the company’s December quarter sales to climb 7% year over year to $69 billion.

However, the company has warned of customers still being slow to buy some items.

“We still see customers remaining cautious about price, trading down where they can and seeking out deals, coupled with lower spending on discretionary items,” said Chief Financial Officer Brian Olsavsky on Amazon’s third-quarter earnings call.

Amazon Stock Jumps After Q3 Earnings

For the quarter that ended in September, Amazon reported adjusted earnings of 94 cents a share. Revenue increased 13% year over year to $143.1 billion.

Amazon stock climbed by nearly 8% in trading following the report.

E-commerce sales were up 7% to $57.3 billion. Wall Street analysts projected sales of $56.97 billion.

Meanwhile, the e-commerce giant collected $34.3 billion from third-party sellers, compared to analyst projections of $33.4 billion.

Advertising sales, meanwhile, totaled $12.1 billion, up 26% from the same period last year.

Further, company officials noted that efforts to streamline its e-commerce fulfillment network are showing benefits.

Finally, operating income increased to $11.2 billion in the third quarter, compared with $2.5 billion for the same period last year. Cost-cutting contributed to that number, including significant layoffs.

AWS Q3 Performance

On the other hand, Amazon Web Services posted a 12% year-over-year sales increase to $23.1 billion. Analysts were expecting sales of $23.2 billion.

But earnings call commentary from Jassy seemed to put antsy investors at ease.

Jassy, who led AWS before taking over as Amazon CEO, acknowledged that businesses were still focused on “cost optimizations” to lower their cloud software spending. Revenue growth for the third quarter was much slower than the 27.5% year-over-year jump in the third quarter of 2022.

“Companies have moved more slowly in an uncertain economy in 2023 to complete deals,” Jassy said. “But we’re seeing the pace and volume of closed deals pick up. We’re encouraged by the strong last couple of months in new deals signed.”

Will Regulators Take A Bite Out Of Amazon Stock?

Meanwhile, Amazon is staring down what is likely the biggest legal fight in its 30-year history. Regulators are challenging Amazon’s market power and the company likely will grapple with intense scrutiny in the coming years.

Amazon’s regulatory problems came into sharp focus on Sept. 26 when the Federal Trade Commission and 17 state attorneys general filed a major antitrust lawsuit against Amazon.

The FTC accuses the company of using its market power to inflate prices and overcharge merchants. Amazon rejects the allegations, arguing that the FTC is “wrong on the facts and the law, and we look forward to making that case in court,” the company said in a statement.

Still, the FTC’s legal challenge has not shifted Wall Street’s view of Amazon. Of the 56 Amazon stock analysts following the company, 96% hold a buy rating, according to FactSet.

In an Oct. 3 client note, JPMorgan analyst Doug Anmuth said the lawsuit “was very much as expected, and we believe it will be challenging to prove that AMZN illegally maintains monopoly power.”

Technical Analysis Of Amazon Stock

Amazon is one of the Magnificent Seven stocks that have fueled the stock market rally this year. Further, AMZN stock’s technical ratings have improved after its earnings report, following a rough September.

Moreover, AMZN stock is on the IBD Leaderboard. As of market open Dec. 26, shares are extended well beyond a 145.86 buy point from a consolidation pattern. Further, Amazon stock hit an intraday 52-week high on Dec. 20 at 155.63.

The IBD Stock Checkup tool, meanwhile, shows Amazon stock with a Relative Strength Rating of 91 out of a best-possible 99, indicating the stock has outperformed most of the market over the past 12 months. 

Amazon stock also holds an IBD Composite Rating of 92 out of a best-possible 99. The score means AMZN stock currently tops 92% of all other stocks in terms of key performance metrics and technical strength.

Further, Amazon stock holds an Accumulation/Distribution Rating of B. That rating analyzes price and volume changes in institutional ownership for a stock over the past 13 weeks. The current rating indicates more buying than selling by institutions.

Here is a guide to understanding IBD’s rating system.

Amazon Market Cap

You can check for Amazon’s current stock price here. Amazon’s market cap is just under $1.6 trillion, as of market open Dec. 26. Here is how the stock has grown over time:

*Prices as of market close Dec. 22.

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