Retail, a stalwart for steady growth, stands as a beacon of opportunity for long-term investors. Embracing a vast landscape ranging from groceries to e-commerce, consumer technology, and beyond, the industry offers a tapestry of investment prospects, propelled by the gusts of innovation across multiple sectors. The global retail market, a colossus that scaled to $27 trillion in 2022, now sets its sights on the lofty summit of $30 trillion in the current year.
Apple has danced in the spotlight of success within the industry, commanding strong market positions across various consumer tech realms, from smartphones and tablets to smartwatches and headphones. Surprisingly, the tech giant also claims the third-largest slice of the e-commerce pie in the U.S., despite offering a narrower product array than its rivals.
An Unstoppable Force: Amazon’s Impressive Resurgence
An economic tempest unleashed havoc across the markets, with the Nasdaq Composite plunging a staggering 33% in the annals of 2022. Retail entities bore the brunt of this storm, reeling under the weight of soaring inflation that coerced consumers to tighten their purse strings. Amazon, a Goliath in its own right, saw its shares plummet by a daunting 50% during this tumultuous period, accompanied by sharp profit downturns in its e-commerce domain.
Nevertheless, a phoenix-like recovery ensued, a testament to the company’s mettle and mettle. In the fiscal theater of 2023, Amazon’s revenue ascended by a robust 12% year-over-year, soaring to the lofty summit of $575 billion, while its operating income tripled, breaching the $37 billion threshold.
A cocktail of cost-reduction measures and a subsiding inflationary environment lent wings to Amazon’s e-commerce endeavors, propelling its free cash flow to stratospheric heights with a jaw-dropping 904% surge to $32 billion over the trailing 12 months.
Meanwhile, Apple weathered the macroeconomic squalls less fortuitously, as its revenue encountered a 3% dip to $383 billion in fiscal 2023, although its free cash flow managed a modest 10% ascent.
The tale of Amazon’s resurgence, a saga of grit and tenacity, underscores the wisdom in adopting a long-term investment horizon. Armed with a substantial war chest and a penchant for expansion, the retail juggernaut remains an irresistible long-haul investment, bracing to spearhead forays into burgeoning fields like artificial intelligence.
Eyeing the Future: Amazon’s Potential Upswing
Amazon’s global dominion in e-commerce, presiding over a realm slated to burgeon to $3.6 trillion in 2024, with a projected compound annual growth rate (CAGR) of 10% through 2028, lays down a fertile runway for continued prosperity. The firm appears poised to harness the tailwinds of this sector for the foreseeable future.
However, the crown jewel in Amazon’s arsenal shines brightest as its cloud platform, Amazon Web Services (AWS), takes center stage. In the closing quarter of 2023, revenue from AWS surged a robust 13% year over year to a princely sum of $24 billion, with the platform accounting for a lion’s share of 54% of the company’s operating income, despite contributing the smallest revenue fraction among its triune segments.
Beyond the confines of pure cloud computing, AWS propels Amazon into the realms of artificial intelligence, an arena forecasted to burgeon at a CAGR of 37% through 2030. As the reigning sovereign in cloud services, AWS wields the potential to harness the might of its colossal cloud infrastructure to steer the ship in the generative AI realm.
Amazon’s foray into this burgeoning landscape, teeming with AI tools nestling within AWS and the unveiling of Rufus, an AI shopping luminary gracing its retail domain, underscores the tech titan’s spellbinding trajectory. Earnings per share (EPS) estimates herald Amazon’s potential, signifying it as a comet on a course divergent from Apple, pointing to a voyage of remarkable growth and innovation.
