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When evaluating the performance of the so-called Magnificent Seven stocks, it’s intriguing to discover that Amazon (NASDAQ: AMZN), one of the most talked-about companies in the world, has posted the least impressive returns over the past five years. This might come as a surprise to many, considering Amazon’s dominant position in e-commerce and its rapid expansion into other lucrative sectors such as cloud computing, advertising, and artificial intelligence.
Despite this apparent underperformance, there are compelling reasons to believe that Amazon’s stock is a buy-now proposition. Firstly, the company’s long-term growth trajectory remains robust. Amazon’s core e-commerce business continues to benefit from the global shift towards online shopping, a trend that has accelerated due to the COVID-19 pandemic. Moreover, Amazon Web Services (AWS), the company’s cloud computing division, has become a critical component of the internet infrastructure, supporting everything from small startups to huge enterprises and governmental agencies.
Beyond these well-established revenue streams, Amazon is continuously innovating and exploring new markets. Its ventures into health care, physical grocery stores, and even space exploration with Blue Origin underscore the company’s ambition and its ability to disrupt industries. Additionally, Amazon’s commitment to sustainability, through initiatives like the Climate Pledge, indicates a long-term strategic vision that aligns with global shifts towards environmental responsibility. These factors contribute to the argument that Amazon’s current valuation does not fully reflect its future growth potential.
Furthermore, Amazon’s financial health is solid, with a strong balance sheet, impressive cash flows, and a track record of above-average revenue growth. While the stock’s performance over the last five years may not have matched some of its peers in the tech sector, it’s important to consider the broader context. The company has made significant investments in its future growth, which may have tempered short-term stock returns but sets the stage for long-term profitability. Considering all these aspects, investors looking for growth opportunities in the tech sector might find Amazon to be an attractive proposition, despite its recent history of lower returns compared to other giants.
