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Over the years, Amazon (NASDAQ: AMZN) has created many millionaires. There have been ups and downs along the way, but $20,000 invested in Amazon stock when the company was listed back in 1997 will be worth $.55 m today!
Amazon’s growth story continues, especially with its big push into AI.
So, where would someone who invested £20k in Amazon stock last month be sitting now?
One month’s solid performance
In the past month, Amazon stock has risen 11%.
So, without exchange rate movements, £20k invested just one month ago in mid-December is already worth £22,200.
For a well-known, large company, that kind of shareholder turnover in the space of a few weeks is attractive in my opinion.
Taking a long-term view
As a general rule, however, I don’t think about investing in just one month’s worth of stock.
My long-term approach to investing means that the preferred timeline is likely to be years or even decades, rather than weeks or months.
However, might now be the right time to buy Amazon stock for my long-term portfolio?
Amazon’s best days may be ahead of it
Amazon has done very well in building its online retail business and marketplace.
But there is a lot more to it than the consumer side of the business. A key strategic plank of Amazon over the past few years has been expanding its web services division, known as AWS.
AWS is already a big business, generating about a fifth of Amazon’s sales revenue in its most recently reported quarter.
AI can help AWS grow exponentially in the coming years.
Amazon has some compelling strengths here, from an intuitive user interface with limited options for hassle-free replacements to deep technical expertise.
That could help make AWS an even bigger profit engine in the future than it already is. Its operating income in the most recent quarter alone was already more than $11bn.
Time to shop?
Over time, the potential for strong growth not just in AWS but in the rest of Amazon’s business could boost earnings — and possibly the stock price.
But that is not guaranteed. As a major data center operation, equipping its sites with the right AI chips and gear is an expensive business for Amazon.
That puts short- and medium-term profits at risk. For now, the benefit of AI in the long run remains to be seen. Maybe it will be bigger, or maybe technological advances will lower customer prices and profit margins.
I see Amazon as a well-run business, but there’s also the risk that using AI and web services around different functions like its online retail business could spread management’s attention too thinly.
On balance, however, I love the business and would invest without hesitation at the right price.
But following an 11% increase in its price over the past month, Amazon stock now trades at 35 earnings. That’s too rich for my taste, so I won’t invest.
