2024-07-14 06:51:04 ET
Summary
- Amazon's aggressive push towards automation is driving exponential EPS increases, leading to strong financial benefits and potential for stock acceleration.
- The company's financial health is bolstered by strong free cash flow projections, and a large automation push.
- Despite challenges post-COVID, Amazon's recent stock performance indicates a strong rebound, with a focus on profitability and automation to mitigate risks.
- The company is building a profitable business model that is far more resistant to recessions than it was before.
Investment Thesis
I believe that Amazon ( AMZN ) remains a strong buy, driven by their aggressive push toward automation, which I believe we are now seeing causing exponential EPS increases. In my previous analysis , I mentioned that the company had recently invested $1 billion in a startup for automation to mitigate the escalating fulfillment costs that have plagued the company for years. This has started to yield financial benefits, with fulfillment costs growing at a slower rate than overall revenue, meaning an exponential increase in operating profits?. The advanced systems are also poised to address persistent labor challenges, including wage pressures and unionization. The company’s profit drive as well is able to help the firm offset any recession risk that may be on their horizon as the US consumer weakens.
I believe there is a reason to anticipate that shares are about to accelerate out of a multi-year range, based on the stock’s trend going back to 2021. During Andy Jassy's tenure as CEO, beginning in July 2021, the e-commerce giant's stock has trailed the market, seen in the stock increase of just 13% compared to roughly a 28% rise in the S&P 500?. Despite this underperformance, recent developments suggest significant upside potential....
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For further details see:
Amazon: Creating Recession Resistant Profits