Amazon Eyes $2 Trillion Market Cap as CEO Talks AI, Cost Cuts
Amazon CEO Andy Jassy thinks there’s "a long way to go" in all of its businesses and that could be good for investors.
Amazon.com (AMZN) CEO Andy Jassy issued his 2023 Letter to Shareholders this week, highlighting the company's strong performance in 2023 – a year in which its stock soared 81%. The executive also outlined opportunities the company has in 2024 and beyond.
"Overall, 2023 was a strong year, and I'm grateful to our collective teams who delivered on behalf of customers," Jassy asked. "These results represent a lot of invention, collaboration, discipline, execution, and reimagination across Amazon. Yet, I think every one of us at Amazon believes that we have a long way to go, in every one of our businesses, before we exhaust how we can make customers' lives better and easier, and there is considerable upside in each of the businesses in which we're investing."
Amazon's stock is up more than 25% so far in 2024 to flirt with the $2 trillion market cap level and Jassy thinks there are plenty of ways for the company to continue enhancing its businesses for customers and shareholders.
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How does Amazon aim to improve in 2024?
Amazon is not done lowering costs. Jassy said the company has identified several areas where it can cut costs within its fulfillment network while also improving delivery times for customers, including the progress it's made with its drone delivery business, Prime Air.
"Need throat lozenges, Advil, an antibiotic, or some other medication?," Jassy asked. "Same-day facilities already deliver many of these items within hours, and that will only get shorter as we launch Prime Air more expansively."
Jassy said Amazon Web Services (AWS) saw "cost optimization attenuating, new deals accelerating, customers renewing at larger commitments over longer time periods, and migrations growing again" at the end of 2023, and added that the business unit was seeing significant traction in its generative artificial intelligence (GenAI) offerings.
The executive spotlighted Amazon's international growth initiatives, saying that the company has "high conviction" that emerging geographies in which the company operates, including India, Brazil, Australia, Mexico, the Middle East and Africa "will continue to grow and be profitable in the long run."
Additionally, Jassy said Prime Video "can be a large and profitable business on its own." He also noted the company would continue its journey of commercializing Project Kuiper, which has the goal of providing 400 million to 500 million households with broadband connectivity that don't have it today.
"There has never been a time in Amazon's history where we've felt there is so much opportunity to make our customers' lives better and easier," Jassy said. "We're incredibly excited about what's possible, focused on inventing the future, and look forward to working together to make it so."
Growth initiatives are good news for Amazon investors
Amazon has already generated tremendous returns for long-term shareholders. By the numbers, a $1,000 investment in AMZN 20 years ago would be worth roughly $147,000 today. And all of the company's future growth initiatives could keep the wind at the stock's back.
What's more, Jassy noted that Amazon's free cash flow surged to $35.5 billion in 2023 vs negative $12.8 billion in 2022.
"Free cash flow (FCF) is one of the most important financial metrics you can study, especially if you're a buy-and-hold investor," writes Kiplinger contributor Will Ashworth. Free cash flow is what's left over after a company pays its expenses, interest on debt, taxes and long-term investments, and if it generates more cash than needed to cover its bills, "it can do a number of useful things with it, such as pay dividends, buy back its stock, acquire other companies, expand its business and knock out its debts."
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