Is Amazon Still a Smart Investment in 2024?
As the year draws to a close, investors are wondering if Amazon’s remarkable 46% gain is a sign of things to come or a warning to exercise caution. With its market capitalization hovering around $2.27 trillion, the e-commerce giant’s stock is trading just 6% below its all-time high.
A Premium Price Tag
Amazon’s stock has always commanded a premium, and its current price-to-earnings ratio of 47 and price-to-free-cash-flow ratio of 53 are no exception. While these metrics may seem steep, it’s essential to consider the company’s historical performance. Despite its lofty valuation, Amazon has consistently delivered exceptional returns, outpacing the S&P 500’s 424% gain over the past 15 years with a staggering 3,070% increase.
Timing is Everything, But Impossible to Predict
Warren Buffett, a seasoned investor, acknowledges that even he cannot predict the stock market’s short-term fluctuations. Instead, he advocates for buying great companies at reasonable prices and holding them for the long haul. This approach has served him well, and it’s a strategy worth considering.
Amazon’s Strengths
Looking ahead, Amazon is poised to benefit from a strengthening economy, the artificial intelligence boom, and its innovative drone delivery system. As a world-class innovator with a flexible business plan, Amazon is well-positioned to continue delivering market-beating returns.
A Balanced Approach
While it may not be the best time to buy Amazon stock, it’s not a bad time either. Consider adopting a balanced approach, such as buying in thirds or using an automated dollar-cost averaging plan to mitigate the impact of price fluctuations. By doing so, you can still reap the benefits of Amazon’s long-term growth potential without overcommitting to a single investment.
Diversification is Key
Before investing in Amazon, remember that a diversified portfolio is essential for minimizing risk. The Motley Fool’s Stock Advisor team has identified 10 stocks that they believe have the potential to produce exceptional returns in the coming years. Consider exploring these opportunities to create a well-rounded investment strategy.
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