Amazon (AMZN -1.87%) investors have been on a bit of a roller-coaster ride in recent years. The company's stock hit record heights in 2021 as COVID-19 lockdowns made its e-commerce site the go-to for homebound consumers everywhere. However, an economic downturn in 2022 saw the company's shares plunge, losing everything gained the year before.
The retail giant delivered an impressive turnaround in 2023, with its stock up about 75% over the last 12 months alongside significant earnings growth. However, shares remain down from their high achieved in 2021 (as seen in the chart below), suggesting it could still have much to offer new investors.
Data by YCharts
Amazon delivered significant gains over the last year and has shown no signs of slowing. It's leading two high-growth markets that represent massive earnings potential, with recent cost-cutting moves strengthening its business for the long term.
So, here is one growth stock down 22% to buy right now.
Amazon delivered an impressive turnaround in 2023
Amazon improved on nearly all fronts last year. After its stock plunged 50% in 2022, alongside considerable earnings declines, the company began restructuring its business with a priority on profits.
Cost-cutting measures such as closing dozens of warehouses, shuttering unprofitable projects like Amazon Care, and laying off thousands of workers have fortified Amazon's future and made it less vulnerable to future macroeconomic headwinds. In fact, recent moves have seen the company's free cash flow soar 427% over the last 12 months.
Moreover, Amazon delivered multiple quarters of beating analysts' expectations. In the third quarter of 2023, the tech giant's revenue rose 13% year over year to $143 billion, beating Wall Street estimates by more than $1.5 billion.
Growth during the period was mainly due to improvements in its e-commerce business. Amazon's North American segment hit more than $4 billion in operating income, a considerable rise from the $412 million in losses it reported in the year-ago period.
Amazon's comeback last year illustrated why its stock is one of the most reliable options. The company proved its resilience and ability to successfully navigate tricky market conditions.
Significant earnings potential in multiple areas of tech
Amazon has come a long way since starting as an Seattle-based online book retailer in 1994.
The company has expanded to a wide number of markets, from e-commerce, cloud computing, grocery, video and music streaming, consumer robotics, and even space satellites. Amazon's massive reach across the consumer market even led it to unintentionally dominate certain sectors, like being responsible for 68% of video game purchases in the U.S.
Amazon's position in several industries means it has significant earnings potential. E-commerce on its own is projected to surpass $3.5 trillion this year and expand at a compound annual growth rate of 9% until at least 2028. Meanwhile, the company holds a leading market share in online retail in multiple countries, with a 38% share in the U.S.
However, the most lucrative part of its business is Amazon Web Services (AWS). The cloud platform is responsible for more than 62% of the company's operating income despite earning the lowest amount of revenue out of its three segments. In Q3 2023, AWS achieved nearly $7 billion in profits, representing growth of 29% year over year.
The cloud market is expanding quickly, boosted by the emergence of artificial intelligence (AI). Businesses are increasingly looking for ways to boost efficiency with the help of AI and turning to cloud services to do so. Meanwhile, AWS' leading 32% market share in cloud computing positions it well to see big gains as AI develops.
Data by YCharts
This chart shows Amazon's earnings could reach close to $5 per share by fiscal 2025. Multiplying that figure by the company's forward price-to-earnings ratio of 41 yields a stock price of $193, projecting growth of 33% over the next two fiscal years.
Given its impressive growth over the last year and positions in several high-profit markets, Amazon's stock is a no-brainer right now.
