Amazon has just become the best investment on the market

Earnings season has been a bit worrisome so far. Shares of well-known names like Microsoft (MSFT 1.25%), Metaplatforms (META -1.69%)And Apple (AAPL 0.46%) All suffered setbacks due to weak results and/or disappointing forecasts. Since these are the most productive companies on the market, their problems bode poorly for the overall market.

However, don't be too hasty and make such a blanket conclusion. There are clear differences in the performance of different companies. Some are struggling but others are doing great.

E-commerce giant Amazon (AMZN 3.25%) is of the latter variety. In fact, it may have just become a top stock pick.

Amazon does everything right, even when its competitors don't

The claim seems overly sensational at first glance, but on closer inspection it actually holds up. Last quarter's revenue of $158.9 billion rose 11% year over year, leading to an increase in earnings per share from $0.94 in the third quarter last year to $1.43 this time . That's stronger revenue growth than the venerable Apple could muster.

Although Microsoft and Meta posted better revenue growth in the three-month period, the other two companies still provided weak guidance. Meta aims to significantly increase spending on artificial intelligence in the near term, while Microsoft's forecast revenue of $68.1 billion for the quarter ending in December fell short of the consensus of $69.8 billion. Amazon expects sales growth of around 9% for the current quarter, increasing operating profit to up to 36%. Not bad.

All of these were key factors in each stock's post-earnings performance. Of those four names, however, Amazon stock was the only one to rise following the news.

However, it's not just Amazon's overall numbers that drove the stock higher last week. How It has produced this growth – and will likely continue to do so – is also a key factor. Most of the improvement came from its cloud computing arm, Amazon Web Services (AWS). The 19% revenue growth boosted AWS's operating income from just under $7 billion a year ago to more than $10.4 billion in the third quarter of this year and increased its operating profit margin from 30% then to 38% today. There is also scope for further expansion of this measure, so that the 60% of company-wide operating income that is already attributable to Amazon Web Services alone is added.

Data Source: Amazon Inc. Chart by Author. The numbers refer to billions.

Then there is the advertising business. This high-margin revenue increased 19% to a record $14.3 billion in the third quarter, once again confirming that this evolution of Amazon's business model makes sense. That's about a tenth of the company's total sales.

However, perhaps the company's most encouraging achievement in the third quarter of the year is the continued progress in its international e-commerce business.

This is an often overlooked detail due to its relatively small size, but historically Amazon's overseas efforts have been unprofitable. That is, until now. Finally, with sufficient size and the right cost controls, the international arm of the company generates ongoing operating revenue. And increasingly so.

Data source: Amazon. Chart by author. The numbers refer to billions.

While it's not yet a particularly large profit center, Amazon's international operations are growing quickly and revenue is growing even faster. It's now making a much bigger contribution to the company's bottom line than most people realize, and that should continue to be the case for a while.

The kicker: While shares of Microsoft, Apple and Meta have repeatedly risen to record highs over the past three years (making them vulnerable to the kind of sell-offs each has suffered recently), that's not the case with Amazon . Amazon shares are now just above their pandemic-related peak, despite last week's profit-driven rise. There is also room for further climbing before it becomes overextended.

Not forever, but certainly for now and the foreseeable future

None of this means that Apple or Microsoft are uncontrollable or that their stocks will never see profits again. Things are changing. In fact, change is constant. Your shares will eventually reach an attractive price again. Your sales and profits will grow again as investors expect. Just give it time.

To the extent that time is money, Amazon is arguably one of the best investments on the market right now and certainly the top prospect among the so-called “Magnificent Seven” stocks. There are no deficiencies in the last quarter's earnings report, and the forecasts for the current fourth quarter were no less in line with investors' expectations. There is no reason to believe that this will continue for the foreseeable future, while shadows of doubt are now being cast over Meta, Apple, Microsoft and others.

This is admittedly a philosophically simple comparison of Amazon to comparable alternatives. But that's exactly what it's about. Sometimes it's the simple – even obvious – differences that end up paying off much more than they seem.