Consumer Spending Fuels Rise of Innovative Giants
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 2 hours ago
0mins
Should l Buy AMZN?
Source: Fool
- Amazon Market Dominance: Amazon accounts for approximately 40% of U.S. online retail sales, and despite this being less than one-fifth of total retail spending, its Prime subscription service with over 200 million members and unmatched supply chain make it an ideal long-term investment.
- Netflix Industry Pioneer: With around 325 million paid subscribers, Netflix is poised for future innovation and monetization through its pending $82.7 billion acquisition of Warner Bros. and related brands, which is expected to provide a decade-long runway for growth and solidify its leadership in streaming.
- Shopify E-commerce Empowerment: Shopify supports over 5 million merchants with online store solutions, achieving $123.8 billion in gross merchandise volume in Q4 2022, and tripling its total volume since 2020, showcasing its strong appeal and stickiness in the global e-commerce market.
- MercadoLibre Growth Potential: As a leading e-commerce and digital payments platform in Latin America, MercadoLibre has seen nearly 130% revenue growth over the past three years, accelerating the adoption of modern technologies during the pandemic, with a current market cap of $10 billion, indicating strong future growth prospects.
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Analyst Views on AMZN
Wall Street analysts forecast AMZN stock price to rise
44 Analyst Rating
41 Buy
3 Hold
0 Sell
Strong Buy
Current: 198.790
Low
175.00
Averages
280.01
High
325.00
Current: 198.790
Low
175.00
Averages
280.01
High
325.00
About AMZN
Amazon.com, Inc. provides a range of products and services to customers. The products offered through its stores include merchandise and content it has purchased for resale and products offered by third-party sellers. The Company’s segments include North America, International and Amazon Web Services (AWS). It serves consumers through its online and physical stores and focuses on selection, price, and convenience. Customers access its offerings through its websites, mobile apps, Alexa, devices, streaming, and physically visiting its stores. It also manufactures and sells electronic devices, including Kindle, Fire tablet, Fire TV, Echo, Ring, Blink, and eero, and develops and produces media content. It serves developers and enterprises of all sizes, including start-ups, government agencies, and academic institutions, through AWS, which offers a set of on-demand technology services, including compute, storage, database, analytics, and machine learning, and other services.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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- Cloud Computing Growth: Amazon Web Services (AWS) reported a 24% year-over-year revenue increase in Q4, reaching an annualized revenue run rate of over $140 billion, indicating strong market demand, particularly for AI workloads, further solidifying its leadership in the cloud computing sector.
- AI Chip Business: Amazon's Trainium2 AI chip has become its fastest-growing chip product, achieving an annualized revenue exceeding $10 billion, showcasing the company's strong momentum in the AI chip market and enhancing its competitiveness in the AI space.
- Profitability Risks and Opportunities: While Amazon's heavy reliance on AWS poses risks, if capital expenditures drive growth in this segment, it could enhance overall profitability, potentially leading to an inflection point in earnings growth in the long term.
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- Significant AI Budget Increase: Amazon plans to raise its capital expenditures to $200 billion for 2023, significantly exceeding Wall Street's expectation of $150 billion, which will decelerate free cash flow and impact short-term stock performance.
- Strong AWS Growth: Amazon Web Services (AWS) generated $35.6 billion in revenue during Q4, reflecting a 24% year-over-year growth, with a staggering $244 billion backlog indicating robust market demand and substantial future growth potential.
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- Customer Migration Opportunity: DigitalOcean quickly published a migration guide to assist Heroku users in transitioning to its App Platform, offering three months of free service, indicating a strong appeal to Heroku customers that could accelerate its revenue growth.
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- Increased Market Competition: DigitalOcean's App Platform is seen as a primary alternative for Heroku customers, quickly releasing a migration guide and offering three months of free service to attract users, capitalizing on the opportunity presented by Salesforce's decision.
- Accelerating Revenue Growth: DigitalOcean reported a 16% year-over-year revenue increase in Q3, raising its 2025 outlook due to a doubling of AI revenue, with revenue from customers spending over $100,000 annually soaring by 41%, indicating its growing popularity among larger clients.
- Strategic Shift Impact: Salesforce's pivot towards AI products like Agentforce may explain the halt in Heroku development, while DigitalOcean offers a more comprehensive solution by combining IaaS and PaaS services, expected to attract more Heroku customers in 2026 and further drive revenue growth.
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- Morgan Stanley Optimistic: Morgan Stanley has an “overweight” rating on ARM with a price target of $135, representing a premium of over 6% from Tuesday's closing price, reflecting a positive outlook on ARM's future performance, particularly in ongoing investments in AI.
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- Capital Expenditure Plan: Amazon plans to invest $200 billion in capital expenditures in 2026, and despite management's expectation of strong long-term returns, investor caution regarding this massive spending has led to a 13% decline in stock price year-to-date.
- Cloud Computing Growth: Amazon Web Services (AWS) reported a 24% year-over-year revenue increase in Q4, reaching an annualized revenue run rate of over $140 billion, indicating strong market demand, particularly for AI workloads, further solidifying its leadership in the cloud computing sector.
- AI Chip Business: Amazon's Trainium2 AI chip has become its fastest-growing chip product, achieving an annualized revenue exceeding $10 billion, showcasing the company's strong momentum in the AI chip market and enhancing its competitiveness in the AI space.
- Profitability Risks and Opportunities: While Amazon's heavy reliance on AWS poses risks, if capital expenditures drive growth in this segment, it could enhance overall profitability, potentially leading to an inflection point in earnings growth in the long term.
See More
Amazon's AI Investments Amid Stock Volatility
- Stock Price Fluctuations: Amazon's stock surged about 7% to $247 per share at the start of the year but has since dropped approximately 14% over the last month, primarily due to the ongoing decline in software stocks, prompting investor sell-offs.
- Significant AI Budget Increase: Amazon plans to raise its capital expenditures to $200 billion for 2023, significantly exceeding Wall Street's expectation of $150 billion, which will decelerate free cash flow and impact short-term stock performance.
- Strong AWS Growth: Amazon Web Services (AWS) generated $35.6 billion in revenue during Q4, reflecting a 24% year-over-year growth, with a staggering $244 billion backlog indicating robust market demand and substantial future growth potential.
- Strategic Partnership Advantages: Amazon's collaboration with Anthropic is establishing a cost-efficient, vertically integrated AI ecosystem, and while initial investment returns may lag, this strategy is expected to enhance the company's competitive edge and market position in the long run.
See More
Salesforce's Shift Impacts Heroku Users
- Heroku Strategic Shift: On February 6, Salesforce announced that Heroku would adopt a 'sustaining engineering model,' meaning while the platform will still receive support, no new features will be developed, significantly diminishing its market competitiveness and likely leading to customer attrition.
- Customer Migration Opportunity: DigitalOcean quickly published a migration guide to assist Heroku users in transitioning to its App Platform, offering three months of free service, indicating a strong appeal to Heroku customers that could accelerate its revenue growth.
- Accelerating Revenue Growth: DigitalOcean reported a 16% year-over-year revenue increase in Q3 and raised its 2025 outlook due to a doubling of AI revenue, indicating a significant rise in popularity among larger clients, with revenue from those spending over $100,000 annually soaring by 41%.
- Intensifying Market Competition: As Salesforce pivots towards AI products, Heroku users may migrate to various cloud platforms, with DigitalOcean's App Platform providing similar convenience to Heroku, potentially leading to accelerated revenue growth in 2026.
See More
Salesforce Halts Development on Heroku PaaS Platform
- Heroku Development Halted: Salesforce has announced the cessation of development on its popular PaaS platform, Heroku, which will continue to operate but without new features, likely forcing customers to seek alternative providers and potentially leading to customer attrition.
- Increased Market Competition: DigitalOcean's App Platform is seen as a primary alternative for Heroku customers, quickly releasing a migration guide and offering three months of free service to attract users, capitalizing on the opportunity presented by Salesforce's decision.
- Accelerating Revenue Growth: DigitalOcean reported a 16% year-over-year revenue increase in Q3, raising its 2025 outlook due to a doubling of AI revenue, with revenue from customers spending over $100,000 annually soaring by 41%, indicating its growing popularity among larger clients.
- Strategic Shift Impact: Salesforce's pivot towards AI products like Agentforce may explain the halt in Heroku development, while DigitalOcean offers a more comprehensive solution by combining IaaS and PaaS services, expected to attract more Heroku customers in 2026 and further drive revenue growth.
See More
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- Nvidia Reduces ARM Stake: Nvidia gradually reduced its stake in ARM by the end of 2024, holding 1.1 million shares valued at $155.8 million; despite the sell-off, Nvidia's 20-year licensing agreement with ARM remains intact, indicating a long-term partnership.
- ARM Earnings Beat Expectations: ARM reported a 26% year-on-year increase in sales to $1.24 billion in its latest earnings report, surpassing analyst expectations and demonstrating strong momentum in AI projects, although its stock fell in after-hours trading, reflecting cautious market sentiment regarding future guidance.
- Positive Market Reaction: Following its Nasdaq debut, ARM's market cap is approximately $135 billion, and Nvidia's stake reduction did not dampen market confidence, as ARM shares rose 1.4% in premarket trading, indicating investor recognition of its long-term growth potential.
- Morgan Stanley Optimistic: Morgan Stanley has an “overweight” rating on ARM with a price target of $135, representing a premium of over 6% from Tuesday's closing price, reflecting a positive outlook on ARM's future performance, particularly in ongoing investments in AI.
See More
Market Shift Sheds Light on AI Challenges: Reasons Behind Stock Struggles and 5 Key Updates for Today.
- S&P 500 Performance: The S&P 500 has been struggling to surpass the 7000 point mark.
- Historical Threshold: This round-number challenge has persisted since the index first tested this level in late October.
See More
