Billionaire investor Warren Buffett usually shies away from stocks on a rocket ship trajectory, preferring steadier assets with long-term growth prospects. He famously warns against the perils of greed fueling parabolic stock movements. While Buffett doesn’t actively seek out such explosive growth investments, some gems in the Berkshire Hathaway treasure trove hint at the potential. Among these lies Amazon, a towering giant on the stock market stage.

Some skeptics may question the possibility of a $2 trillion market-cap entity like Amazon experiencing a parabolic surge. However, discerning investors who delve deeper into Amazon’s lesser-known ventures can discern the seeds of a potential rocket boost.

The Thrust Behind Amazon’s Growth

Amazon’s juggernaut AWS remains the driving force behind its revenue at present, though showing signs of a gentle growth taper. The retail titan’s dominance in the U.S. and global e-commerce spheres is unmistakable. Yet, its colossal size has somewhat curbed its growth momentum.

However, the untapped potential for explosive expansion in Amazon’s underexplored business segments now holds the key. One such area is its burgeoning digital advertising arm, a domain acclaimed for its remarkable profitability, as exemplified by Meta Platforms’ digital advertising unit.

Amazon’s digital ad revenue touched nearly $12 billion in Q1, showcasing a 24% year-over-year surge, outpacing its other revenue streams. This momentum, coupled with the company’s foray into the realm of artificial intelligence through its investment in Anthropic, spells a promising narrative. The synergy between AWS’s cloud supremacy and Amazon’s AI aspirations could very well draw investor attention akin to Nvidia’s meteoric rise in the AI realm.

Image source: Statista.

Amazon’s Financial Fortitude

Amazon’s adept maneuvering through its current growth channels, a facet paramount to Buffett’s investment philosophy, deserves accolades. The tech titan’s Q1 net sales surpassed $143 billion, marking a 13% yearly uptick.

With AWS contributing $25 billion to Amazon’s revenue and over $9 billion to its operating income, the cloud segment reigns supreme, underpinning most of the behemoth’s profits. This operational prowess, coupled with Amazon’s digital ad push, catapulted its Q1 net income to a staggering 229% year-over-year leap to $10 billion.

Although Amazon’s retail segments traditionally exhibit modest operating margins, the burgeoning digital ad arena, buoyed by its vast online presence, promises to bolster both divisions. This strategic diversification could propel Amazon’s profits skyward at a pace uncommon for a mega-cap entity.

Surprisingly, a high P/E ratio of 52 for Amazon, although lofty compared to S&P 500 peers, pales in comparison to historic levels, potentially heralding an uptick in stock uptake.

Sowing Seeds for Amazon’s Stratospheric Growth

Buffett’s investment orthodoxy rarely veers towards parabolic plays, yet Amazon’s trajectory harbors the potential for a swift upsurge. Bolstered by rapid expansion and promising margin extensions, Amazon’s stock is primed for a vigorous ascent. With brewing potentials in its retail and AWS segments and a significant nudge from the Anthropic synergy, Amazon’s stock may witness a lofty flight.

As Amazon garners increasing favor among consumers and investors alike, its modest P/E ratio of 52 could kindle a resurgence in market interest, escalating the stock’s trajectory to lofty altitudes.