Goldman Sachs has named Amazon as its top large-cap internet pick for 2024, citing its potential to explore new growth avenues by harnessing evolving e-commerce trends and advancements in artificial intelligence (AI). Analysts led by Eric Sheridan have outlined several key themes that are expected to drive Amazon’s growth in the coming year. In this article, we will explore these themes and why Goldman Sachs is bullish on Amazon’s prospects for 2024.
Amazon’s Potential Growth Drivers in 2024
The Evolving Nature of Amazon Prime
One of the driving forces behind Amazon’s expected growth in 2024 is the rising “utility nature” of Amazon Prime users’ shopping habits. As consumers increasingly rely on Amazon Prime for a wide range of goods and services, the platform becomes deeply integrated into their daily lives.
Enhanced Services for Third-Party Sellers
Amazon is set to expand its service offerings for third-party sellers both on and off the platform. This move aims to empower sellers with more tools and resources to succeed in the competitive e-commerce landscape.
The Convergence of Advertising and E-Commerce
Goldman Sachs highlights the trend of blurring lines between digital advertising and e-commerce business models. Retail media networks are gaining prominence, allowing retailers to sell ad space on their digital channels to third-party brands. Amazon, with its vast reach and advertising capabilities, is well-positioned to capitalize on this trend.
Margin Self-Repair and International Expansion
Amazon’s margin self-repair is anticipated in the coming years. This involves the normalization of e-commerce margins in North America and improved international margins. As the company fine-tunes its operations, it aims to enhance profitability.
Amazon Web Services (AWS) and AI Opportunities
The analysts at Goldman Sachs emphasize the underappreciated growth opportunity for Amazon Web Services (AWS). As the cloud computing landscape evolves alongside advancements in artificial intelligence, AWS is expected to play a pivotal role.
Amazon’s Impressive Performance in 2023
Surging Stock Performance
Amazon has delivered remarkable stock performance in 2023, with gains exceeding 73%. This outstanding performance has outpaced the broader market, reflecting the company’s ability to navigate challenging economic conditions and capitalize on key growth segments.
Key Drivers of Success
Several factors have contributed to Amazon’s stock gains. These include the robust performance of its cloud business, Amazon Web Services (AWS), and its digital advertising segments. Additionally, cost discipline efforts following the pandemic-era expansion have played a crucial role, as has Amazon’s dominant position in the e-commerce market.
Exceeding Expectations
Amazon’s third-quarter results exceeded analyst expectations, with a 13% increase in revenue during the period. This solid performance is a testament to Amazon’s resilience and adaptability in a rapidly changing business landscape.
Amazon’s Strategic Alliances and Growth Opportunities
Collaborations with Meta, Snap, and Pinterest
In November, Amazon unveiled a partnership with Meta (formerly Facebook) to enable users to link their social media accounts and seamlessly shop through social media feeds without leaving Meta-owned apps. Similar collaborations were announced with Snap in November and Pinterest in April. These partnerships are expected to drive transaction growth and provide advertisers with valuable measurement and attribution signals.
The Rise of Retail Media Networks
The growth of retail media networks, where retailers sell ad space on their digital channels to third-party brands, presents a significant opportunity for Amazon. With its global user base, extensive first-party data, and diverse offering of media and digital platforms, Amazon is well-positioned to thrive in this space.
Prime Video’s Entry into Advertising
Amazon is planning to introduce ads on its Prime Video platform in early 2024 in select regions, including the U.S., U.K., Germany, and Canada. This move is expected to boost overall advertising revenue and attract a broader base of advertisers.
Expanding On-Demand Delivery
Amazon’s continued expansion of on-demand delivery services beyond restaurant meals to include grocery and alcohol aligns with consumer preferences for convenience, choice, and speed. This expansion is poised to capitalize on e-commerce trends.
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Goldman Sachs anticipates the increased use of AI and machine learning tools in Amazon Web Services (AWS). This technology-driven approach is expected to fuel growth and improve profit margins.
Bottom-line: Goldman Sachs’ designation of Amazon as its top large-cap internet pick for 2024 underscores the company’s resilience and growth potential. With a focus on leveraging evolving e-commerce trends and AI advancements, Amazon aims to continue its impressive performance into the next year. The convergence of advertising and e-commerce, strategic alliances, and the expansion of its service offerings are among the key strategies that position Amazon for success. As the digital landscape evolves, Amazon remains a dominant force, well-equipped to thrive in the ever-changing world of online commerce.
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This content is provided for informational purposes only and does not constitute financial, investment, tax or legal advice or a recommendation to buy any security or other financial asset. The content is general in nature and does not reflect any individual’s unique personal circumstances. The above content might not be suitable for your particular circumstances. Before making any financial decisions, you should strongly consider seeking advice from your own financial or investment advisor.
