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Amazon (NASDAQ:AMZN) stock has faced its fair share of criticism in recent years. From concerns about its momentum to criticism of its energy usage and disregard for privacy rights, the company has been under scrutiny. However, despite all the negativity, Amazon remains the largest holding in my retirement account. This is a familiar story.
In the past, other major companies like IBM (NYSE:IBM), AT&T (NYSE:T), Walmart (NYSE:WMT), and Dollar General (NYSE:DG) have all faced similar backlash when they dominated the market.
Valid Criticisms of AMZN Stock
It’s important to acknowledge that no company can sustain endless growth, not even Amazon. Its growth rate has slowed down significantly in recent years, dropping from 37% in 2020 to just 9% last year. Operating cash flow has also remained nearly flat, and the company had to lay off 18,000 workers earlier this year.
Like other tech giants, Amazon has faced increased costs due to advancements in AI. Companies like Nvidia (NASDAQ:NVDA) have been able to charge a premium for their chips because they control the software stack.
Amazon has also experienced setbacks, such as layoffs in its games unit, music business, Alexa division, and even at its crown jewel, Amazon Web Services.
The company has had to adapt to changes in technology and address issues like theft and abuse of its third-party sales system. It has also raised the cost of Amazon Prime and plans to charge an additional $3/month to subscribers who want ad-free Prime video.
Where Haters are Mistaken
Firstly, scaled computing and warehousing are necessary for delivering low costs, which is why Amazon invested in its cloud data centers and warehousing systems. Secondly, in order to provide personalized service, Amazon needs to understand its customers’ preferences, just like a bartender knows how you like your martini.
Amazon itself is a remarkable achievement of the 21st century. Orders can be fulfilled on the same day they are placed, and Amazon Web Services alone is valued at twice the worth of the entire company.
Despite my initial skepticism, I now believe that Andy Jassy, Bezos’ successor, has made the right moves in 2023. The cutbacks and price hikes all make sense. The upcoming $3/month charge for Prime video will provide valuable insights into customer preferences.
The Future of AMZN Stock
Amazon’s growth will continue, with improvements in sales, profits, and cash flow. Amazon Web Services will maintain its lead in the cloud computing market, and the company will expand its global footprint. Additionally, Alexa is expected to make a comeback with enhanced intelligence.
While there is room for improvement and challenges ahead, Amazon’s diversification sets it apart from other tech giants. The company is well-equipped to weather any storms that come its way, and its ventures into healthcare further solidify its position.
As of this writing, Dana Blankenhorn holds long positions in AMZN and NVDA. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
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