Let's take a closer look at the bullish thesis for Amazon and why it could soar even higher from here.
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For those looking for top mega-cap tech stocks to buy and hold, Amazon (Nasdaq:Amazon) has proven to be a great long-term pick. In fact, AMZN stock has seen impressive growth this year, joining the $2 trillion club. Amazon continues to show strength and growth in generative AI, e-commerce, and cloud computing. In fact, the company's AWS cloud services business commands a 31% share of the cloud market, which suggests there is still room for growth.
The company's use of AI has boosted its core e-commerce business, helping Amazon set a delivery record in March, with 60% of Prime orders arriving within a day. AI-driven improvements are expected to fuel growth even faster, with second-quarter net sales projected to rise 7% to 11%.
Amazon is highly diversified, leading in e-commerce and cloud computing, and expanding into media, advertising, streaming, groceries, smart home technology, robotics, and gaming. This flexibility gives it a competitive edge, and its recent investments in generative AI promise further growth, giving Amazon an edge over other tech giants.
Buy before Q2 earnings announcement
My view is that investors may want to consider buying AMZN stock before the company reports its second-quarter earnings on Aug. 1. Amazon shares have risen 40% over the past year, recovering from pandemic-era struggles and a bear market sell-off that could see it fall further into 2022. Despite the challenges, Amazon has emerged stronger, making it a viable investment for long-term investors.
Analysts at Bernstein and Truist recently raised their price targets on AMZN, which has outperformed most of the Magnificent 7 stocks of late. Amazon is due to release its second-quarter earnings report on August 1, which many market analysts are expecting.
Well-known analyst Yousef Squali recently reaffirmed his buy recommendation on AMZN and raised his price target to $230 per share. Squali expects strong second-quarter results, citing favorable sales and advertising trends, as well as growth in Amazon Web Services. Squali highlighted Amazon's resilience and competitive position in global e-commerce despite weakening consumer markets.
Bernstein maintained its buy rating on Amazon and raised its price target to $215. The analysts expect Amazon to grow its operating profit and free cash flow as it continues to improve efficiency. Despite lowering its cloud and e-commerce revenue forecasts, the analysts see advertising revenue forecasts increasing due to strong demand for Prime Video ads.
AI is key to this big tech stock thesis
The recent string of upgrades is certainly a bullish sign for Amazon, and there are plenty of reasons to be so bullish, from the company's impressive potential in AI to its dominant position in the world of e-commerce and cloud computing.
If revenues grow at a rate of 18% or more year over year, the stock is poised for a big upside post-earnings. While many other mega-cap tech stocks have fallen after recent earnings reports, Amazon is an exception. The company is highly diversified across multiple highly profitable sectors, which should bode well for a long-term investment thesis among buy-and-hold investors.
On the date of publication, Chris McDonald did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the author in accordance with InvestorPlace.com's Publishing Guidelines.
On the date of publication, the editor in charge did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
