£20,000 invested in Amazon shares just 3 months ago would now be worth…

Our writer examines the impressive recent performance of Amazon shares and considers whether he thinks the stock still offers good value.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Image source: Amazon

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

It’s almost surreal that Amazon (NASDAQ: AMZN) shares lost 54% of their value between mid-2021 and late 2022. Or perhaps recency bias makes me think it surreal as they’ve since bounced back in style, surging 180% to take the company’s market cap to a record $2.48trn.

Indeed, the stock is up by a market-thrashing 25.4% in just the past three months! That means an investor who was brave enough to plonk down £20,000 in late October would now be sitting on around £25,080. That’s a fantastic return in just under 14 weeks.

But are Amazon shares still worth considering today after this strong showing? Let’s take a look.

Should you invest £1,000 in Safestore Plc right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Safestore Plc made the list?

See the 6 stocks

Created with Highcharts 11.4.3Amazon PriceZoom1M3M6MYTD1Y5Y10YALL28 Jan 202028 Jan 2025Zoom ▾Jul '20Jan '21Jul '21Jan '22Jul '22Jan '23Jul '23Jan '24Jul '24Jan '2520212021202220222023202320242024www.fool.co.uk

Diversified business

One of the things I like about Amazon from an investing point of view is its optionality. In other words, it has different ways to win beyond online retail. It operates the world’s leading cloud computing platform, Amazon Web Services (AWS), and generates revenue by selling warehouse capacity and logistics services.

It also has a fast-growing digital advertising business on its e-commerce app. Sellers can pay to have their items appear at the top of search results or on product pages. Amazon charges them a fee whenever someone clicks on their sponsored listing. This is a very profitable revenue stream, while the Prime subscription service keeps customers coming back. 

The company is also investing in delivery robots and drones, self-driving vehicles, various artificial intelligence (AI) initiatives, and more. While these can weigh on near-term profitability, they also have the power to boost efficiency and margins over the long run.

Despite being 30 years old and therefore no spring chicken, Amazon is still one of the most exciting companies around, in my opinion.

Surging profits

In recent years, the company has turned itself into a leaner beast. Consequently, its operating cash flow is absolutely surging, as we can see below.

Created at TradingView

Plus, Wall Street analysts forecast double-digit revenue growth over the next few years. In fact, the company remains on track to generate a mind-boggling $1trn in annual revenue by 2030! This assumes Amazon grows its top line by approximately 8% annually, which I think is more than realistic.

That said, nearing such a symbolic figure could bring negative headlines and more regulatory scrutiny in future. Last year, the US Federal Trade Commission advanced an antitrust lawsuit accusing Amazon of operating an unlawful monopoly. So potential regulation presents future risks here, I’d argue.

Is there any value left?

Unsurprisingly, the stock isn’t cheap after its monster run. It’s trading at four times sales, while the forward price-to-earnings (P/E) ratio is 37.

Yet I think this is reasonable value, considering the company’s profit margins are expected to continue expanding. The P/E ratio for 2026 drops to 31, based on consensus forecasts.

However, as we saw in 2022, Amazon stock can also go down as well as up. It has lost 50%+ of its value on multiple occasions over the past three decades. Therefore, it’s best-suited to long-term investors with a stomach for volatility.

Looking ahead over the next few years, I can only see Amazon getting larger as areas like e-commerce, digital advertising, and cloud computing expand worldwide.

Despite being at a record high, I think the stock is well worth considering.

Should you invest £1,000 in Safestore Plc right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Safestore Plc made the list?

See the 6 stocks

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Ben McPoland has no position in any of the shares mentioned. The Motley Fool UK has recommended Amazon. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

Here’s the dividend forecast for Rolls-Royce shares as Trump rocks the markets

Rolls-Royce shares have joined in the volatility over the past week. However, with the direction being largely downwards, the dividend…

Read more »

Young Asian man drinking coffee at home and looking at his phone
Investing Articles

Dividend yields of up to 11%! Here are 3 UK passive income stocks to consider

Searching for ways to supercharge your passive income with UK dividend stocks? Here are three that have grabbed our writer's…

Read more »

Young Caucasian woman at the street withdrawing money at the ATM
Investing Articles

£10,000 invested in NatWest shares at the start of 2025 is now worth…

NatWest shares surged into 2025, but things have become a little more complicated in recent weeks. Dr James Fox explores.

Read more »

Investing For Beginners

Why the FTSE 250 could outperform the FTSE 100 for the rest of the year

Jon Smith explains why the FTSE 250 could do better than its big brother when factoring in domestic exposure and…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

Tariff fears send the Lloyds share price tumbling, but the dividend yield is climbing

Just when the Lloyds Banking Group share price had been rising steadily, along comes a global upheaval to knock it…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

Here’s how a stock market crash could help an investor retire years early

A stock market crash can be alarming -- but for the well-prepared investor, it can also be an exceptional opportunity…

Read more »

Investing Articles

1 key fact to remember in this stock market correction

This writer takes a look at a FTSE 100 investment trust that is catching his eye after the recent massive…

Read more »

Investing Articles

I was wrong about the Tesla stock price!

Tesla stock's been affected more than most by ‘Liberation Day’. But our writer has other concerns about Elon Musk’s company.

Read more »