Amazon (NASDAQ:AMZN | AMZN Price Prediction) is one of Jim Cramer’s favorite stocks. He referred to the stock as “an overall piece” while touting its influence in several verticals. Artificial intelligence, cloud computing, retail, and advertising are some of the segments that drive Amazon’s profits higher.
Cramer has been bullish on Amazon stock for many years, but does that mean investors should jump on board? These are some of the key details to consider before buying shares of the e-commerce giant.
Amazon Web Services Is Still The Leading Cloud Platform
Amazon Web Services has been a cash cow for Amazon. Not only does the segment regularly grow, but it also produces high profit margins for the company. Amazon’s AI-fueled cloud platform is one of the reasons why it has higher profit margins than other large retailers.
The cloud segment delivered 17% year-over-year revenue growth in the first quarter, with overall sales jumping by 9% year-over-year.
Artificial intelligence remains a deep part of Amazon’s plans. The company recently introduced Alexa+, which is “meaningfully smarter and more capable than her prior self.” It can answer questions and perform tasks. This new resource is free with Prime.
Amazon Prime Day Continues To Succeed
Not only is Amazon at the forefront of artificial intelligence, but its e-commerce store makes it one of the most resistant stocks to inflation. Analysts project that Amazon Prime Day generated $21.4 billion in gross merchandise volume, which represents a 60% year-over-year increase.
Amazon received price hikes as a result of the successful Prime Day event. The tech giant has become the most convenient place to buy everyday products. Amazon also displays online ads across its e-commerce site, resulting in additional revenue for each visitor.
The e-commerce store also presents a strong incentive for people to use Amazon Prime. That’s because Prime members get free shipping and faster deliveries than people who do not use Prime. An Amazon Prime account also comes with a bunch of other perks, making it hard for people to resist the company’s lucrative subscription plan.
Profits Continue To Grow
Jeff Bezos reinvested all profits back into the business when it was starting out. That decision helped Amazon make key acquisitions that turned it into a tech behemoth. While the company is still growing, it’s also generated some nice profits over the year.
For instance, Amazon reported $17.1 billion in net income during the first quarter. That was a 64.2% year-over-year increase that helped the company realize an 11.0% net profit margin.
Some AI stocks deliver high revenue growth but burn through a lot of cash to produce those numbers. Amazon’s strong financial position demonstrates stability and makes it easier for the tech giant to capitalize on emerging opportunities.
Rising profits also result in a more reasonable valuation for long-term investors. The stock currently trades at a 38 P/E ratio with Q2 earnings due in a week.
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