Amazon Stock’s Major Catalysts Make It a Buy

Under the leadership of CEO Andy Jassy Amazon (NASDAQ:AMZN) continues to make a number of moves that should significantly boost its top and bottom lines in the long run. Those moves include the conglomerate’s e-commerce, artificial intelligence, and healthcare businesses.

As a result of Amazon’s incredibly promising initiatives, I still believe that Amazon’s stock is significantly undervalued. I still believe that all investors should buy the company’s stock.

Neutralizing e-commerce threats

Some people on the street believe, PDD Holdings‘ (NASDAQ:PDD) The Temu website could pose a serious threat to Amazon’s e-commerce business. This is because, as Business Investor Journal reported in May that “Temu’s shopping site is attracting a huge following with its attractive discounts.” Of course, Temu can offer products at very low prices because labor costs in China are so low.

In his favor, Jassy has found a solution to this threat. Specifically, the American conglomerate is planning to launch a “shopping division” that will allow American consumers to buy products directly from China. Among them are “non-branded fashion (and) home goods.” This move effectively eliminates the threat to Amazon from Temu and other similar Chinese e-commerce sites. I don’t think it’s a coincidence that Amazon shares rose a significant 6.5% between June 25, the day before the news broke, and July 1.

AI everywhere

Coming back to AI, Amazon is reportedly working on an AI chatbot, which is reportedly called Metis. Potentially, Metis is somewhat unique in that it can use “new data” to make decisions. Additionally, the chatbot’s reported ability to develop “travel itineraries and other comprehensive plans” could set it apart from its competitors.

On a separate but related front, Amazon is reportedly looking to equip its voice assistant Alexa with artificial intelligence. Among the capabilities Alexa could gain from such a move are increased personalization and routines. As a result of these capabilities, Alexa could control smart devices in the home based on her knowledge. Additionally, the devices could be used to compose emails and quickly place orders Uber Technologies (NYSE:UBER) Uber Eats.

Bank of America estimates that by charging a $5 per month subscription fee for AI-powered Alexa, Amazon could increase its subscription revenue by 1.3 percentage points in 2025.

Healthcare Initiatives

Amazon continues to build a healthcare empire, which will ultimately impact the price of Amazon and the value of Amazon stock.

The conglomerate recently revealed on June 18 that its $5-a-month prescription delivery program would become available to Medicare recipients immediately. Under the deal, users could access an unlimited number of generic medications. Given that there are 50 million Medicare recipients, the change could significantly improve Amazon’s bottom line in the long run.

Meanwhile, the company expanded its same-day prescription drug delivery service to both Los Angeles and New York in March. That same month, the company announced it would partner with Eli Lilly (NYSE:LLY) to deliver pharmaceutical company drugs to consumers’ homes, including popular weight-loss products.

As I’ve noted before, I expect Amazon to strike similar deals with many other pharmaceutical companies. In effect, the conglomerate will eliminate the “middlemen,” i.e., pharmacy benefit managers, while making significantly less profit than the chain pharmacies. Ultimately, the vast majority of drugmakers and consumers will realize that they can save a lot of money by going through Amazon rather than using the current standard methods.

Summary

Under Jassy, ​​Amazon has effectively eliminated the threat posed by Chinese e-commerce companies. Meanwhile, the conglomerate seems poised to build wildly successful AI and healthcare businesses.

As a result, given the relatively low enterprise value to EBITDA ratio of 21, I still recommend buying Amazon stock.

On the date of publication, Larry Ramer held a long position in AMZN. The opinions expressed in this article are the author’s own, subject to the InvestorPlace.com Publishing Guidelines..

On the date of publication of this article, the editor in charge did not hold (directly or indirectly) any interests in the securities referred to in this article.