1 Growth Stock Down 23% to Buy Right Now

This year has been characterized by the strong performances of some of the biggest tech names. Among them, Amazon (AMZN 1.65%) has done a nice job of rewarding shareholders, as the stock is up a whopping 70% in 2023 (as of Nov. 15). Investors are warming up to the tech titan.

But even with the incredible bull run underway, Amazon shares are still down 23% off their all-time high, which was set in July 2021. Now might be the perfect time to buy this growth stock on the dip. Let’s take a closer look.

Recent financial results

Since reporting its third quarter (ended Sept. 30) financial results on Oct. 26, Amazon’s stock has climbed 20%. That’s because revenue of $143.1 billion and diluted earnings per share of $0.94 both exceeded Wall Street estimates. In fact, Amazon’s year-over-year sales gain of 13% was the fastest growth rate in four quarters, a potential sign that business is picking up. Investors will want to watch how the key holiday shopping season impacts the company’s financials in the current quarter.

Amazon Web Services (AWS) draws a lot of attention from the investment community. While revenue was only up 12%, continuing an ongoing slowdown, the segment’s operating margin of 30% was the highest in at least the last six quarters.

Digital advertising is a booming area in which Amazon is experiencing tremendous success. Ad revenue rose 25% to just over $12 billion last quarter. Amazon trails behind only Alphabet and Meta Platforms in the U.S. market in terms of online advertising market share. That’s not surprising given that amazon.com had 4.2 billion visitors in the month of October, a huge amount of traffic that is valuable to target.

Zooming out

In addition to strong business momentum in the latest quarter, Amazon has some favorable qualities that investors can be optimistic about as they look at the long-term picture for the company. Amazon’s massive logistics footprint is a well-oiled machine that allows for the delivery of products at low costs. It’s a challenge for anyone to compete with this scale.

And while Amazon is already such a huge organization with trailing-12-month net sales of $554 billion, it’s not hard to see where the growth will come from going forward. E-commerce, the company’s bread and butter, still has sizable growth prospects. Moreover, the digital advertising and cloud computing industries are set to register rapid gains in the decade ahead. As a leader benefiting from all of these secular trends, Amazon is in a wonderful position.

Investors might be discouraged about the slower growth at AWS, but the segment’s leading market share means that Amazon has the potential to be a leader in artificial intelligence (AI) innovations. “We’re innovating and delivering at a rapid rate and our approach is resonating with customers,” said CEO Andy Jassy on the Q3 2023 earnings call. The number of companies building generative AI apps in AWS is substantial and growing very quickly.

Look at the valuation

Amazon’s stock might be in the middle of a remarkable run in 2023, but that doesn’t necessarily mean that it’s expensive. As I noted earlier, the stock is still below its all-time high. It trades at a price-to-sales multiple of 2.7. That’s meaningfully below the trailing-10-year average of 3.1.

Without a doubt, this is one of the most dominant companies on the face of the planet. Its business is on solid footing, and the future is bright. Now is a great time to buy the stock.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Neil Patel and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, and Meta Platforms. The Motley Fool has a disclosure policy.

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