No conversation about successful investing would be complete without a nod to legendary Berkshire Hathaway CEO Warren Buffett. The so-called “Oracle of Omaha” has helmed the conglomerate for more than 50 years, racking up returns that may never be matched. In fact, since taking the helm in 1965, Berkshire has delivered gains of more than 20% annually, and its overall returns have soared an eyebrow-raising 3,641,613%.

In the face of the persistent economic headwinds that have “buffeted” the economy, investors are turning to Berkshire’s portfolio for inspiration. One stock that stands out as a particularly intriguing opportunity right now is Amazon (AMZN). The e-commerce pioneer has fallen out of favor with Wall Street, currently down a whopping 49% from its peak.

Yet, even in the face of its current challenges, it’s far from a company in peril. Investors appear to be ignoring its strong history of growth, leading position in several industries, and resulting track record of success.

E-commerce: The industry it revolutionized
Amazon wasn’t the first company to tackle e-commerce, but it didn’t take long for the company to dominate the industry. While estimates vary, Amazon is widely hailed as the global leader of online retail, generating revenue of more than $131 billion in 2021, according to Statista. In the U.S., Amazon controls roughly 38% of the e-commerce market, more than the next 14 digital retailers combined.

Despite its industry-leading position, however, investors worry that the decelerating sales that followed its pandemic-related growth spurt may be the new normal. The company’s recent results seemed to give those fears credence. In the third quarter of 2022, net sales grew 15% year over year to $127 billion, a far cry from the 44% growth Amazon generated during widespread lockdowns in early 2021.

In the face of economic headwinds, online retail may have slowed, but it’s far from over. The global e-commerce market is expected to grow from $3.3 trillion in 2022 to $5.4 trillion in 2026 and account for 27% of all retail, according to data supplied by Morgan Stanley. As the industry leader, Amazon is well-positioned to reap the benefits of this continuing trend.

Fair to partly cloudy
E-commerce isn’t the only area that Amazon rules with an iron fist. The company also dominates the cloud infrastructure market, an industry it pioneered. During the first nine months of 2022, Amazon Web Services (AWS) grew revenue 32% year over year, while operating income increased 33%.

Furthermore, as the adoption of cloud computing continues, Amazon will earn its share of the growing pie. Amazon has a market share of 32%, more than Microsoft Azure and Alphabet‘s Google Cloud — combined — which account for 22% and 9%, respectively, according to Canalys.

The ongoing digital transformation and adoption of cloud computing should provide secular tailwinds for Amazon for years to come.

It all “ads” up
Former Amazon CEO Jeff Bezos famously said, “Your margin is my opportunity.” He could have easily been talking about the online ad market when he made that pronouncement. Amazon stealthily rose through the ranks to become the No. 3 digital advertiser, joining existing leaders Google and Meta Platforms.

Yet in face of the current economic headwinds, Amazon showed its mettle. In the third quarter, Amazon’s digital ad revenue grew 25% year over year, outperforming the results of its chief rivals. Google grew revenue by 2% while Meta Platforms’ results declined 4%.

While it may never reach the sheer magnitude of its peers, Amazon’s digital advertising business shows how quickly the company can become a force to be reckoned with in an area.

Its next big growth engine?
Because of the breadth of its business, Amazon’s next big growth engine could be a business that’s an afterthought today.

Amazon has long kept a hand in the streaming video space and has more than 200 million Prime subscribers as a captive audience. With the $8.5 billion acquisition of MGM Studios early last year, Amazon signaled it plans to remain a major player.

Just this week, Amazon announced plans to expand its Buy with Prime service, which allows other digital retailers to use its shipping and logistics services to deliver their merchandise — for a price. This will push the company further into competition with FedEx and United Parcel Service while simultaneously generating an entirely new revenue stream.

We don’t know what Amazon’s next big growth area will be, but given its history, chances are the company will one day dominate yet another industry.

A dirt cheap stock
Investors focusing solely on slowing e-commerce growth may be missing the forest for the trees. As a result, Amazon stock is currently dirt cheap, trading for less than 2 times sales, its lowest price-to-sales ratio since 2014.

Add to its dirt-cheap price a strong history of growth and innovation and a solid moat, and Amazon is definitely a stock to buy before it starts soaring.

— Danny Vena

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