Amazon Stock Outlook: What’s Its Next Big Money Maker?
While some would argue that Amazon 
AMZN has three moneymakers with e-commerce, AWS and its digital advertising business if AMZN stock is to keep moving higher, it needs a third significant profit center.
Amazon’s e-commerce business drives the ecosystem, but it will never generate the profits that the other two businesses do.
In some ways, Apple 
AAPL is in a better position than AMZN stock because although its iPhone business dominates, it has plenty of revenue streams that generate reasonable profits.
In 2023, its North American segment, which is its e-commerce business, had an operating profit of $14.9 billion, good for an operating margin of 14.1%. While that’s much better than some grocery store chains – Kroger’s 
KR five-year average is 2.24% – it’s a pittance compared to its other businesses.
The obvious answer to the third leg of its profit stool could be AI, a part of AWS. However, there might be two other areas of interest that could jump out of the woodwork.
Let’s explore the possibilities.
AWS and AMZN Stock
AWS had a decent year in 2023, generating $24.6 billion in operating profits from $90.8 billion in revenue (27.1% operating margin). However, compared to 2022, its operating margin was 140 basis points lower. It’s not a huge contraction, but it’s notable nonetheless.
There’s no question that AWS has been a home run for Amazon over the years. As CEO Andy Jassy wrote in his 2022 shareholder letter, AWS was a relatively small business in 2008. Jassy was senior vice president of Web Services at the time, and the division did not break out the business’s revenue and profits, incorporating them instead within the North America and International segments.
In 2007, the entire Amazon business generated $14.84 billion in revenue. AWS did six times that amount in 2023.
Forget product sales, which accounted for 47% of its $513.98 billion in revenue in 2022, and focus instead on its service sales (53%), which includes third-party seller fees, related fulfillment and shipping fees, AWS sales, advertising services, Amazon Prime membership fees, and certain digital content subscriptions.
Right there, you’ve got three significant revenue and profit generators. AI would be a fourth.
What will be the next two after AI?
Health Care Could Be Next
I remember when Amazon partnered with Berkshire Hathaway 
BRK.B and JPMorgan Chase 
JPM in January 2018 to launch Haven to create a better health care provider. It was shuttered three years later.
Ever since, Amazon has tried to gain traction in health care, but it’s been mostly in fits and starts.
In February, the company announced it would cut a few hundred jobs at its Amazon Healthcare Services unit. The jobs affected were at One Medical (a primary care provider) and Amazon Pharmacy (an online pharmacy).
Amazon paid $3.9 billion for One Medical in 2022. It’s looking to slash $100 million in annual operating costs from the business and lower its fixed operating costs by half to 20% of revenue by 2028. In addition, it wants to reduce the cost of a patient’s visit from $372 in 2023 to $322 in 2024.
One thing that should help is that it added One Medical to its Prime membership benefits. The additional service costs $99 annually or $9 monthly. That’s what scale can do for you. Not everyone can deliver this benefit to its members.
I expect Amazon to continue experimenting with its health care business until it finds the right balance between revenue and profits.
Health care is a massive industry in the U.S. I can’t see the company exiting despite the losses.
Amazon Sports Gets Busy
Amazon has approximately 200 million Prime members worldwide, with 84% in the U.S. The tremendous revenue it could generate from sports enthusiasts among its vast membership.
It’s already doing some stuff with Prime Video’s sports programming. As Jassy stated in the company’s Q4 2023 news release, its Thursday Night Football saw total viewership rise 24% over last year, getting 15.3 million viewers for the Vikings-Cowboys game on Nov. 30.
It also makes documentaries (Kelce, Bye Bye Barry) and streams live sports such as NASCAR, the National Women’s Soccer League, ICC Cricket, etc.
It’s barely scratched the surface of what it could do in the sports arena, both from a B2C and B2B perspective. Ticket sales, travel packages to big games, and sports betting cater to this 200-million-person cohort.
It’s an excellent position to be in.
As I said in March 2018, it will own more of your home sooner than you think.
AMZN stock remains an excellent buy.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.comPublishing Guidelines.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.
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