3 reasons Amazon’s inventory could hit $ 5,000 in 2022

Amazon‘s (NASDAQ: AMZN) the stock looks like a coil spring.

Gains linked to the pandemic led to a dramatic 76% increase in the online retail giant’s share price in 2020. Then its stock essentially stalled last year due to exaggerated fears. a slowdown in its growth. Now Amazon looks set to reach new heights again. Here’s why.

Image source: Getty Images.

1. The online retail market is always expanding

E-commerce sales represent about 13% of total retail sales in the United States, up from less than 5% in 2010, according to Statista.

This graph shows that online sales peaked at nearly 16% of overall retail sales in the second quarter of 2020. This coincided with strict social distancing measures during the early stages of the pandemic, which forced many retailers to close their stores. That figure has fallen by around 3 percentage points since then as the economy has reopened and people have resumed shopping in stores more often.

Statistic: E-commerce as a share of total US retail sales from Q1 2010 to Q3 2021 |  Statistical
Image source: Statista

Many investors saw this as a sign that the expansion of the e-commerce industry has stalled. It is a mistake. Many of the benefits of shopping online, such as more product selection, attractive prices, and fast, convenient shipping options, are even more prevalent today. For example, Amazon has invested aggressively in recent years to strengthen its distribution network so that it can offer overnight and even same-day delivery services to more of its customers.

Partly because of these benefits, global e-commerce sales are expected to exceed $ 7.3 trillion in 2025, up from $ 4.2 billion in 2020, according to eMarketer. Amazon may benefit more from this megatrend than any other business.

2. The transition to the cloud is still in its early stages

The global cloud computing market will grow 19 percent annually and exceed $ 1.2 trillion by 2028, according to Grand View Research. Rising internet penetration rates, skyrocketing data consumption, and increased adoption of cutting-edge technologies such as 5G and artificial intelligence (AI) will help fuel its growth.

In this massive and rapidly expanding market, infrastructure as a service (IaaS) providers – who provide businesses with the tools they need to grow and scale their cloud operations – are expected to experience particularly impressive growth. And among cloud infrastructure providers, Amazon Web Services (AWS) is the clear market leader, with an industry share of around 32%.

With so much growth yet to come, investors can expect AWS to continue to grow Amazon’s sales and profits over the next decade.

3. The digital advertising market is booming

Amazon’s leading presence in e-commerce has also made it a powerful force in the advertising industry, so much so that it is gaining shares of Alphabet‘s (NASDAQ: GOOGL) (NASDAQ: GOOG) Google and Meta-platforms(NASDAQ: FB) Facebook.

The U.S. digital advertising market will nearly double to more than $ 270 billion by 2023, from $ 153 billion in 2020, according to eMarketer. Amazon’s share of this fast-growing industry is expected to drop from 10.3% to 14.6% during this period.

Meanwhile, Google and Facebook’s market shares are expected to decline from 28.9% and 24.9%, respectively, to 26.4% and 24.1%.

The reason? Amazon’s growing army of third-party merchants are enjoying a higher ROI by advertising directly on their ecommerce platform. This makes sense, because unlike Facebook and Google, people usually visit Amazon for the express purpose of buying something.

Never one to rest on its laurels, Amazon is rolling out a multitude of new advertising features for its merchants. This should help the e-commerce and cloud computing juggernaut to capture a greater share of the burgeoning digital advertising market – and provide investors with another powerful engine of growth in the years to come.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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