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It recently announced new AI tools that should be a draw for clients.
It's opening its largest-ever physical store to compete with other retailers.
Cloud and e-commerce both still have massive opportunities as trends shift.
Amazon (NASDAQ: AMZN) stock trailed the S&P 500 last year despite robust growth. This could be an excellent opportunity for investors, but only if Amazon stock is likely to recover. Let's see what might happen when it reports fourth-quarter and full-year earnings on Feb. 5, and whether or not it make sense to buy the stock now.
Image source: Amazon.
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The main thing that's going to be on investors' minds when hearing about the fourth quarter is artificial intelligence (AI). This is where the company's greatest opportunities lie right now, but the market hasn't been enthusiastic about its platform lately.
Management continues to say that it has more features than the competition and that it's launching them more rapidly. It also has a backlog of $200 billion for Amazon Web Services (AWS), where clients can engage with AI development.
Amazon has a multilayered platform that runs across three tiers: custom large-language models (LLM), the Bedrock program, and many plug-in tools for smaller companies. CEO Andy Jassy is always talking about what he sees as a massive opportunity, since 85% to 90% of information technology (IT) spend is still on the premises, but it's slowly shifting to the cloud.
Investors will want to hear about new advances in the AI platform and healthy growth in AWS sales. The company recently unveiled a new line of AI agents that can handle many more actions without needing help from users, as well as new chips and new tools for its LLMs. The results, though, may not show up in the fourth-quarter report.
Amazon still has a huge lead and plenty of opportunity in e-commerce. According to Jassy, a similar shift to the cloud is still taking place in e-commerce, with 80% to 85% of retail taking place in physical stores. Amazon is likely to update shareholders about new advances in e-commerce, with faster shipping speeds and new products that help it keep its dominant position.
The fourth quarter is the holiday season, when Amazon reports its highest sales numbers, but not necessarily its highest growth. Consumer data reports point to a strong holiday season, especially in e-commerce, and Amazon should be a big winner there.
The company recently announced its largest-ever physical store to open outside of Chicago, planned to be bigger than the average Walmart or Costco Wholesale store. Amazon has closed several physical stores and has yet to land on the right brick-and-mortar model, and this is its latest attempt.
Trends appear to be in Amazon's favor for a strong fourth-quarter report, but if you buy Amazon stock before the release date, do it for the major long-term opportunities, not the potential short-term jump.
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Jennifer Saibil has positions in Walmart. The Motley Fool has positions in and recommends Amazon, Costco Wholesale, and Walmart. The Motley Fool has a disclosure policy.
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