As 2024 draws to a close, many investors are probably wondering about the same things. Will there be a Santa Claus Rally this December, or will the markets sell off as investors prepare for tax loss harvesting?
Spending too much time thinking about these things can disillusion investors, causing them to miss some obvious -- and lucrative -- opportunities.
Below, I'm going to break down why I see December as a great time to scoop up shares in "Magnificent Seven" member Amazon (NASDAQ: AMZN). Believe it or not, the company has loads of opportunities right now, and I see Amazon as the best Magnificent Seven stock buy at the moment, by far.
Why December could be a massive month for Amazon
Amazon reports revenue across the following major categories: online stores, physical stores, third-party seller services, advertising, subscription services, Amazon Web Services. Let's explore how each of these is poised to benefit in December.
Holiday shopping
Online and physical stores: Brick-and-mortar retail comprises only a small portion of Amazon's total business; the company's bread and butter resides in the world of e-commerce. Yet despite this divide, I think both Amazon's online and physical storefronts are about to experience a bellwether driven by holiday shoppers.
According to eMarketer, holiday sales are expected to grow 5% year over year in 2024 to $1.4 trillion. While the majority of these sales is forecast to occur in physical retail outlets, e-commerce sales are expected to grow much faster -- at a rate of 9.5% and reaching $267 billion.
Amazon is one of the largest e-commerce marketplaces in the world as measured by gross merchandise volume (GMV). Between Amazon's October Prime Big Deals Day, Black Friday, and Cyber Monday, the company is positioned to capture much of the holiday shopping activity across both online and physical retail.
Third-party seller services: You may not realize it, but Amazon allows individual people or other online stores to sell products through its website. Amazon handles fulfillment and shipping logistics and charges these sellers a commission fee in exchange. To me, this business is also positioned to experience holiday shopping-driven tailwinds.
Advertising: Amazon's fastest-growing business segment stems from advertising. The company generates revenue in this segment through sponsored ads for vendors, sellers, authors, and even through the Prime Video platform. The holidays are an obvious time to promote products across various distribution channels, and Amazon stands to benefit from an uptick in advertising spend as businesses push hard to generate some extra growth before the end of the year.
All told, Amazon has several ways to benefit from holiday shopping trends across its ecosystem.
Subscription services
Another one of Amazon's core businesses comes from its Prime subscription service. On the surface, you may think December is no different than any other month when it comes to driving subscription sales. However, I see two reasons why Prime could see an uptick in December.
First, given the various holiday shopping days that I outlined above, I wouldn't be surprised to see some consumers sign up for Prime and take advantage of its benefits (namely, free shipping). In my eyes, if you're going to spend money on gifts, you might as well try to do it in a cost-friendly manner.
Another potential tailwind for subscriptions could be a new series set release on Prime Video. On Dec. 19, Amazon is releasing a new series featuring MrBeast -- the biggest content creator on YouTube. This new show could drive engagement on Prime Video, particularly among younger demographics who may be inclined to sign up for a subscription given their familiarity with e-commerce, streaming, and many of the other products Amazon already offers.
Amazon Web Services
One of the more subtle growth opportunities for Amazon in December could be from its cloud computing platform, Amazon Web Services (AWS). As a former financial analyst, I can say with high confidence that businesses of all sizes have been working around the clock over the last few months building out budgets for 2025.
With next year only weeks away, it's time to put the finishing touches on those budgets and forecasts. One area that should see a pronounced uptick next year is investment in generative artificial intelligence (AI). As a result, AWS demand could witness some notable acceleration as companies double down on AI roadmaps and IT spending.
Image source: Getty Images.
What does history say?
While many of the ideas explored above make sense on the surface, how do Amazon's historical results actually compare?
| Category | Q1 2021 | Q2 2021 | Q3 2021 | Q4 2021 | Q1 2022 | Q2 2022 | Q3 2022 | Q4 2022 | Q1 2023 | Q2 2023 | Q3 2023 | Q4 2023 |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Online stores | $52.9 billion | $53.2 billion | $49.9 billion | $66.1 billion | $51.1 billion | $50.9 billion | $53.5 billion | $64.5 billion | $51.1 billion | $52.9 billion | $57.3 billion | $70.5 billion |
| Physical stores | $3.9 billion | $4.2 billion | $4.3 billion | $4.7 billion | $4.6 billion | $4.7 billion | $4.7 billion | $4.9 billion | $4.9 billion | $5.0 billion | $4.9 billion | $5.2 billion |
| Third-party seller services | $23.7 billion | $25.1 billion | $24.3 billion | $30.3 billion | $25.3 billion | $27.4 billion | $28.7 billion | $36.3 billion | $29.8 billion | $32.3 billion | $34.3 billion | $43.6 billion |
| Subscription services | $7.6 billion | $7.9 billion | $8.1 billion | $8.1 billion | $8.4 billion | $8.7 billion | $8.9 billion | $9.2 billion | $9.7 billion | $9.9 billion | $10.2 billion | $10.5 billion |
| Advertising services | $6.4 billion | $7.5 billion | $7.6 billion | $9.7 billion | $7.9 billion | $8.8 billion | $9.5 billion | $11.6 billion | $9.5 billion | $10.7 billion | $12.1 billion | $14.7 billion |
| AWS | $13.5 billion | $14.8 billion | $16.1 billion | $17.8 billion | $18.4 billion | $19.7 billion | $20.5 billion | $21.4 billion | $21.4 billion | $22.1 billion | $23.1 billion | $24.2 billion |
| Other | $0.5 billion | $0.5 billion | $0.5 billion | $0.7 billion | $0.7 billion | $1.1 billion | $1.3 billion | $1.3 billion | $1.0 billion | $1.3 billion | $1.2 billion | $1.4 billion |
Data source: Amazon.
The big takeaway from these figures is that the fourth quarter (figures in bold) tends to be Amazon's biggest revenue generator across every major segment.
Given the bullish forecast for holiday shopping trends this year -- which are supported by cooling inflation and tapering interest rates -- combined with new content hitting Prime Video and AI's role in technology budgets going into next year, December is an incredible time to load up on Amazon stock and hold on heading into next year.
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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. Adam Spatacco has positions in Amazon. The Motley Fool has positions in and recommends Amazon. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
