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I own many different individual stocks in my Stocks and Shares ISA and that’s not going to change any time soon. But I often like to think about which one I’d choose if I could only hold onto one.
It’s never easy to come to a conclusion because there are so many brilliant companies out there today that are likely to get much bigger in the years and decades ahead. But I think I’d go with Amazon (NASDAQ: AMZN) if I had to pick one stock for the long term right now…
Amazon started out as an online shopping company. And today, it’s still having a lot of success on this front. In Q1, it generated a whopping $126bn in digital sales. I expect this number to grow in the years ahead as consumers continue to embrace e-commerce.
Online shopping is only one part of the business however. Over the last decade, Amazon’s become far more diversified in nature.
Cloud computing
Another major area of the business today is cloud computing. Here, its Amazon Web Services (AWS) division is seeing strong growth. In Q1, revenue climbed 17% year on year to $29.3bn. I see plenty of growth potential ahead given that a large proportion of businesses are still yet to move to the cloud.
Artificial intelligence
Linked to the cloud business is artificial intelligence (AI). Here, Amazon is rolling out a ton of features to help businesses increase efficiency and reduce costs (there are more than 1,000 GenAI applications being built across Amazon). It’s also developing AI chips. These are being positioned as an alternative to Nvidia’s AI chips.
Generative AI is going to reinvent virtually every customer experience we know, and enable altogether new ones about which we’ve only fantasised.
Amazon annual letter 2024
Digital advertising
Amazon is also very active in the digital advertising space these days through its website and through Prime TV. In fact, it’s now the third largest digital advertising company globally.
This is a lucrative industry. And I expect it to be a major growth driver – and cash cow – for the company over the next decade.
Other growth drivers
On top of all this, Amazon operates in digital healthcare (Amazon Pharmacy and Amazon One Medical), space satellite broadband (Project Kuiper), and self-driving cars (Zoox). So overall, it has a lot of ways to win.
The diversified nature of the business is the main reason I’d pick Amazon if I could only pick one stock. If one area of the business falters, it could still potentially do really well over the long term.
Worth considering today
Now, this isn’t a stock that moves up in a straight line. It can be volatile at times, and 20% pullbacks are quite common (we’ve seen one recently).
It’s worth pointing out that in the near term, there are a few risks that could slow the company’s growth. A drop in consumer spending and less business outlay on cloud computing and AI are some examples.
I believe this stock has a lot of potential in the long run however. And its current share price and valuation (the forward-looking price-to-earnings (P/E) ratio is 26), I think it’s worth considering.
