2 Reasons Amazon Is a Dynamite Stock for 2024
There were a lot of questions swirling around Amazon (NASDAQ: AMZN) stock at the beginning of this year. Amazon Web Services' (AWS) growth rate slowed from 27% in 2021 to 12% in the third quarter of 2023. Inflation was high, labor was in short supply, and the stock traded at its lowest point since the pandemic crash, which was precisely why I pegged it as a great buy. The company's challenges were significant; however, they were short-term headwinds. With investors leaving in droves, it was a perfect moment to act like Warren Buffett and get greedy when others were fearful. The stock rocketed more than 80% in 2023 as the headwinds slackened.
As we head into 2024, there are reasons for continued optimism. Companies cut their data usage and advertising budgets in 2023 because of widespread fear of recession. The recession didn't materialize, and companies may loosen their purse strings in 2024 as a result. The two segments below will be beneficiaries.
AWS functions much like a utility; customers pay for what they use. At the beginning of 2023, customers came to Amazon with a problem. The challenging economic environment necessitated scaling back on data usage spending. As Amazon's CEO Andy Jassy explained multiple times on earnings calls, Amazon was happy to assist them with cutting their spending even though sales in 2023 would suffer. The chart below shows that while sales reached $88 billion over the trailing 12 months, growth was tepid.
Source Fool.com
