As 2024 draws to a close, it's clear that one monster stock continues to fly under the radar: Amazon (NASDAQ: AMZN). Despite its year-to-date gain of 37%, I don't think the company is getting the respect it deserves.
So, let's have a closer look at Amazon and see why this monster stock is a name that investors should keep an eye on as we head into 2025 -- and beyond.
Image source: Getty Images.
Amazon has many strengths
The first thing to understand about Amazon is its massive size. The company has a market cap of $2.2 trillion and annual revenue of around $600 billion. That makes it the fifth-largest American company by market cap and the second-largest by revenue.
Therefore, it's no surprise that Amazon contains several business units that would be enormous companies in their own right, if they were stand-alone businesses.
Take Amazon Web Services (AWS), for example. AWS now generates over $100 billion in annual revenue and is growing at 19% year over year. If it were a publicly traded company, it would be the 33rd-largest American stock by revenue, slightly ahead of Tesla and Nvidia.
Similarly, Amazon's advertising business is mammoth. It generated about $50 billion in sales over the last 12 months. If this business segment were spun off as a separate business, Amazon's ad unit would rank within the top 100 American companies by revenue, with roughly the same annual sales as athletic giant Nike.
All of this is to say nothing of Amazon's most well-known business -- its gigantic e-commerce unit, which generates nearly half a trillion dollars in revenue annually.
Granted, not all of Amazon's units are as fast-growing or profitable as they once were. However, this wide variety of businesses is one key reason Amazon's stock keeps climbing. Amazon has many ways to win; if one segment hits a bump in the road, the company can often balance that with outperformance from another segment.
Over time, that helps the company deliver impressive results and a higher stock price.
Amazon continues to deliver solid growth and profits
At the end of the day, what has made Amazon such a great stock to own is its ability to deliver increasing revenue and profits. Thankfully for investors, there's plenty of signs indicating Amazon will keep this up going forward.
For example, if you review the company's most recent quarterly earnings report (for the three months ending on Sept. 30, 2024), a few things stand out:
- 11% total revenue growth
- $17.4 billion in operating income (an all-time high)
- $70.8 billion in 12-month free cash flow (an all-time high)
These are three of the most important financial metrics for any company (revenue growth, operating income, and free cash flow). And for two of those three, Amazon is currently hitting record highs -- revenue growth, while still impressive, has been higher in the past.
Taken together, these metrics tell an even more important story: Amazon's CEO Andy Jassy is executing his vision and making the company more efficient, thus delivering higher profits and free cash flow. That's critical, as profits and free cash flow can be used to deliver shareholder value through dividend payments, share buybacks, capital investment, and strategic acquisitions.
Investors should sit up and take notice: Amazon is executing at arguably its best-ever level. And for a stock that's up more than 1,000% over just the last decade, that's saying something.
Should you invest $1,000 in Amazon right now?
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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. Jake Lerch has positions in Amazon, Nvidia, and Tesla. The Motley Fool has positions in and recommends Amazon, Nike, Nvidia, and Tesla. 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.
