This past Tuesday, July 11, marked the best day of sales in Amazon’s history.
This was the first of Amazon’s annual two-day “Prime Day” special.
Amazon Prime members bought more than 375 million items online over these two days.
And so far in 2023, the online retailer’s share price is up 60%.
This all comes after Amazon laid off about 27,000 employees late last year and early this year.
So, what is going on with the company? Is Amazon gearing up to be the next stock market darling of 2023 – following in the footsteps of success stories like Nvidia?
Today, I’ll tell you what our research says about Amazon as a company. And then I’ll share an even better way to profit from Amazon’s business… The best part? You don’t have to be a Prime member or even purchase a single share of Amazon to do it.
Amazon Is Red Hot with Room to Run
Amazon is spectacularly outperforming the market right now.
Its 60% increase this year beats both the Nasdaq, which is up 40%, and the S&P 500, up 20%.
After its record-beating Prime Day sales, Amazon is one of the hottest stocks of 2023.
This all comes after it was trading at a crazy 70% discount to fair value in 2022. That’s the most undervalued Amazon has ever been, which led to the layoffs of 9% of its staff.
But now the market is waking up to its explosive growth.
As you can see below, analysts’ estimates are predicting that Amazon’s earnings and free cash flows will soar in the coming years.
(Source: FAST Graphs, FactSet)
This is due to smart cost-cutting and massive investments in its delivery capacity starting to pay off.
Since the pandemic, Amazon has spent $150 billion doubling its delivery capacity.
What took Amazon 20 years to build, it recently built again in just two years. That speed of growth shows just how profitable it’s been.
And Amazon’s long-term growth potential remains impressive.
As Amazon’s costs come down and its sales soar, analysts expect its profit margins to grow at a mind-boggling rate.
Just look at how fast they expect Amazon’s margins to grow through 2028, rounded to the nearest billion.
(Source: FAST Graphs, FactSet)
Amazon is expected to become the first $1 trillion sales company by the end of this decade. And its free cash flow is growing almost 50% per year.
Amazon usually trades at 26 times cash flow. And that’s what most investors have paid for the past 20+ years.
But in December 2022, it hit recent all-time lows and traded at just 7.5 times cash flow. That’s 71% cheaper than it was for the past two decades.
Today, Amazon trades at 16 times cash flow and just 16 times cash-adjusted earnings. That’s still 38% cheaper than its historical levels.
So if you’ve been looking for an opportunity to buy Amazon at a discount to its estimated value, now is the time.
As for us, while we think Amazon is a great business, it falters in one crucial area as an investment: The stock doesn’t pay a dividend.
The Backdoor Income Play to Profit From Amazon
Dividend stocks and income investing are our bread and butter here at Wide Moat Research. Based on our decades of research, we know this is the most reliable way to grow wealth year after year.
So you shouldn’t be surprised to hear we have a way to play on the success of Amazon… that provides the dividend we seek.
Brad Thomas recently put together a strategy he calls the “Amazon Royalty” play. He recommended it last month, and Amazon’s success is making it even more profitable.
With this play you can cash in on Amazon’s incredible explosive growth while earning a safe 4.3% yield that grows like clockwork no matter what the market or economy is doing.
So even if Amazon takes longer than analysts estimate to get back to its previous levels… or faces another roadblock in its business… we can continue to rake in profits from its record-beating sales.
If Amazon really does become the first $1 trillion sales company, you don’t want to miss out on these gains.
Analyst, Intelligent Income Daily