We recently compiled a list of the 20 Most Profitable Stocks of the Last 20 Years. In this article, we are going to take a look at where Amazon.com, Inc. (NASDAQ:AMZN) stands against the other profitable stocks.
The stock market has a long history of generating wealth for investors. While past performance doesn’t guarantee future results, studying successful companies can provide valuable insights. By understanding the factors that drive these companies’ growth, we can potentially make better investment decisions in the future. It’s important to remember that investing involves risk, and conducting thorough research is crucial before making any investment decisions.
Investors frequently overlook revenue in favor of profitability when evaluating stocks. Profit is what’s left over after all costs are paid. Revenue is the total amount of goods and services sold. Because it is essential to determine if a business is a growth stock or a value one, profitability is important. To learn more about growth stocks, see 12 Best Growth Stocks to Buy and Hold in 2024. You can also discover some undervalued value stocks by reading 11 Oversold Value Stocks To Buy Now.
The U.S. stock market has seen several major events since 2000, including the dot-com boom and fall, the 2008 financial crisis, a tech boom with trillion-dollar values, and the 2020 pandemic crisis. The S&P’s broader market index produced double-digit yearly returns thirteen times between 2003 and 2023. This strong performance can be largely attributed to the phenomenal returns generated by technology stocks, which significantly boosted the overall return of the large-cap market.
According to a recent estimate, the aggregate market value of the top seven S&P 500 corporations is almost double that of the Japanese market. The head of topical research and global economics, Jim Reid, cautions that this is the most concentrated the US market has ever been.
As interest in growth stocks increases due to the hype surrounding AI and the prospect of rate cuts, these companies’ fortunes are expected to soar. To satisfy market demand, businesses are making significant investments in AI. AI’s impact on altering work patterns was highlighted by Satya Nadella du. According to them,:
“A growing body of evidence makes clear the role AI will play in transforming work. Our own research, as well as external studies, show as much as 70% improvement in productivity, using generative AI for specific work tasks.”
Our Methodology
To identify the most profitable stocks, we looked at the 20-year annualized returns of publicly traded companies in the US market from 2004 to 2024 and selected and ranked those with the highest 20-year annualized returns.
A customer entering an internet retail store, illustrating the convenience of online shopping.
Amazon.com, Inc. (NASDAQ:AMZN)
20-Year Annualized Return: 23.84%
Amazon.com, Inc. (NASDAQ:AMZN) has emerged as one of the most profitable stocks of the last 20 years, transforming from an online bookstore to a global e-commerce and technology giant. The company operates in various sectors, including e-commerce, cloud computing, artificial intelligence, and digital streaming. An investment of $1,000 in Amazon stock 20 years ago would be worth approximately $90,500 today, representing an annualized return of 24%.
Amazon.com, Inc. (NASDAQ:AMZN) achieved a 13% increase in net sales to $143.3 billion in Q1 2024 compared to $127.4 billion in Q1 2023. Key growth drivers included AWS, which saw a 17% revenue increase to $25.04 billion driven by expanding cloud adoption and AI capabilities. Advertising revenue surged 24% to $11.8 billion, bolstered by sponsored ads and integration into Prime Video. Retail net sales grew 13%, benefiting from enhanced delivery speeds and product variety. The company’s profitability also soared, with net income reaching $10.4 billion in Q1 2024, up from $3.2 billion which was fueled by effective cost management and growth in high-margin segments like AWS and advertising.
AWS achieved a $100 billion annual revenue run rate, underscoring its dominance in cloud computing. Amazon anticipates Q2 2024 operating income between $10 billion and $14 billion, reflecting continued investment in AI infrastructure to sustain customer demand and drive long-term expansion.
In Q1 2024, there were around 302 hedge fund holders in the company, up from 293 in the previous quarter. Fisher Asset Management held the largest position in the company, with around 42,566,342 worth $7,678,116,830.
Amazon stock is rated “Strong Buy” by 44 analysts. Of the 43 analysts providing 12-month price forecasts, the average target is $208.98, ranging from $140 to $245 which indicates a potential increase of 5.76% from the current stock price of $197.59.
Overall AMZN ranks 5th on our list of the most profitable stocks of the last 20 years. You can visit 20 Most Profitable Stocks of the Last 20 Years to see the other profitable stocks that are on hedge funds’ radar. While we acknowledge the potential of AMZN as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than AMZN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
