Is It Too Late to Buy Amazon Stock? A Comprehensive Analysis

Is It Too Late to Buy Amazon Stock? | The Motley Fool

Recent dips in unemployment increase the likelihood of the Federal Reserve cutting interest rates. Lower interest rates will allow companies to borrow at a lower cost, a prospect that has made Wall Street bullish. However, a potential decrease in interest rates isn't the only reason to consider buying Amazon's stock. After more than a year of impressive gains in its e-commerce business, the company is on a promising growth trajectory. Meanwhile, Amazon's heavy investments in markets like cloud computing, AI, and digital advertising are beginning to pay off. Over the years, Amazon consistently and strategically reinvested in its business, diversifying revenue streams and becoming one of the biggest players in tech. As a result, its stock price has soared 105% over the last five years and is likely nowhere near hitting its ceiling. So, here's why it's not too late to invest in Amazon's stock. Macroeconomic headwinds in 2022 brought the Nasdaq Composite and S&P 500 crashing 33% and 19%, respectively, throughout the challenging year. Many of the world's most valuable companies were affected, with Amazon's shares plunging 50%. Spikes in inflation caused consumers to pullback, leading to steep profit declines in the company's retail segments. Amazon responded to poor market conditions by introducing strict cost-cutting measures. Alongside market improvements, the retail giant's performance over the last year has illustrated its ability to successfully navigate dips in the market and come back strong once headwinds subside. In the first quarter of 2024, Amazon's revenue increased by 13% year over year. The company's e-commerce divisions posted significant gains, with sales in its North American and international segments up 12% and 10%, respectively. However, the most impressive growth came from rising profits, as the two retail segments hit nearly $6 billion in operating income. The figure outperforms last year's losses of $349 million, with the business staunchly returning to profitability. A solid turnaround in Amazon's e-commerce segments proves the reliability of its business, as it's clearly never down for long. Retail still accounts for more than 80% of the company's revenue despite expansions into other markets. Recent earnings show that the backbone of Amazon's business is thriving, expanding its cash reserves and increasing its spending power in other markets. Amazon is never still for long, a characteristic that has seen the company expand from an online book retailer in Seattle to a behemoth in e-commerce, cloud computing, video streaming, and dozens of other sectors. In 2024 alone, Amazon has invested billions into developing Amazon Web Services' (AWS) cloud infrastructure in regions such as Taiwan, Spain, Saudi Arabia, Mexico, and more. On home soil, the company is broadening its reach by building data centers in Indiana and Virginia, spending a combined $46 billion in the U.S. projects. Much of Amazon's focus is on AWS because of its massive potential in AI and high-profit margins. Cloud computing has become a crucial growth area in AI as companies increasingly turn to such platforms to integrate the generative technology into their businesses. As the world's largest cloud service, AWS is working to maintain its lead as rivals Microsoft's Azure and Alphabet's Google Cloud similarly expand. Additionally, AWS has quickly become Amazon's most profitable business. In Q1 2024, AWS sales rose 17% year over year while operating income nearly doubled. Despite earning the lowest portion of revenue among Amazon's three primary segments, AWS was responsible for 62% of its operating income. In addition to cloud computing, Q1 2024 highlighted the potential of Amazon's burgeoning digital-ad business. During the quarter, its advertising-services revenue rose 24% year over year after the introduction of ads on its Prime Video streaming service. Streaming advertising is a relatively new market, with companies like Netflix, Disney, and Warner Bros. Discovery only recently launching new ad-supported tiers to their platforms. However, Amazon's leading market share in streaming could give it an edge in the space, allowing it to attract advertisers more easily. Amazon's business is expanding quickly, and despite recently hitting a new high in its share price, the company likely has much more to offer investors over the long term. Meanwhile, its price-to-sales ratio of 3.5 suggests its stock is trading at a value, making it too good to pass up this July.

Is It Too Late to Buy Amazon Stock?

Shares in Amazon (NASDAQ: AMZN) hit a new all-time high last week, rising to $200 per share. The rally came as multiple tech companies similarly achieved new highs, including Alphabet, Apple, Microsoft, and Meta Platforms. Recent dips in unemployment increase the likelihood of the Federal Reserve cutting interest rates. Lower interest rates will allow companies to borrow at a lower cost, a prospect that has made Wall Street bullish. However, a potential decrease in interest rates isn't the only reason to consider buying Amazon's stock. After more than a year of impressive gains in its e-commerce business, the company is on a promising growth trajectory. Meanwhile, Amazon's heavy investments in markets like cloud computing, AI, and digital advertising are beginning to pay off. Over the years, Amazon consistently and strategically reinvested in its business, diversifying revenue streams and becoming one of the biggest players in tech. As a result, its stock price has soared 105% over the last five years and is likely nowhere near hitting its ceiling. So, here's why it's not too late to invest in Amazon's stock. Delivering an impressive turnaround Macroeconomic headwinds in 2022 brought the Nasdaq Composite and S&P 500 crashing 33% and 19%, respectively, throughout the challenging year. Many of the world's most valuable companies were affected, with Amazon's shares plunging 50%. Spikes in inflation caused consumers to pullback, leading to steep profit declines in the company's retail segments. Amazon responded to poor market conditions by introducing strict cost-cutting measures. Alongside market improvements, the retail giant's performance over the last year has illustrated its ability to successfully navigate dips in the market and come back strong once headwinds subside. In the first quarter of 2024, Amazon's revenue increased by 13% year over year. The company's e-commerce divisions posted significant gains, with sales in its North American and international segments up 12% and 10%, respectively. However, the most impressive growth came from rising profits, as the two retail segments hit nearly $6 billion in operating income. The figure outperforms last year's losses of $349 million, with the business staunchly returning to profitability. A solid turnaround in Amazon's e-commerce segments proves the reliability of its business, as it's clearly never down for long. Retail still accounts for more than 80% of the company's revenue despite expansions into other markets. Recent earnings show that the backbone of Amazon's business is thriving, expanding its cash reserves and increasing its spending power in other markets. Amazon is diversifying by expanding its reach in tech Amazon is never still for long, a characteristic that has seen the company expand from an online book retailer in Seattle to a behemoth in e-commerce, cloud computing, video streaming, and dozens of other sectors. In 2024 alone, Amazon has invested billions into developing Amazon Web Services' (AWS) cloud infrastructure in regions such as Taiwan, Spain, Saudi Arabia, Mexico, and more. On home soil, the company is broadening its reach by building data centers in Indiana and Virginia, spending a combined $46 billion in the U.S. projects. Much of Amazon's focus is on AWS because of its massive potential in AI and high-profit margins. Cloud computing has become a crucial growth area in AI as companies increasingly turn to such platforms to integrate the generative technology into their businesses. As the world's largest cloud service, AWS is working to maintain its lead as rivals Microsoft's Azure and Alphabet's Google Cloud similarly expand. Additionally, AWS has quickly become Amazon's most profitable business. In Q1 2024, AWS sales rose 17% year over year while operating income nearly doubled. Despite earning the lowest portion of revenue among Amazon's three primary segments, AWS was responsible for 62% of its operating income. In addition to cloud computing, Q1 2024 highlighted the potential of Amazon's burgeoning digital-ad business. During the quarter, its advertising-services revenue rose 24% year over year after the introduction of ads on its Prime Video streaming service. Streaming advertising is a relatively new market, with companies like Netflix, Disney, and Warner Bros. Discovery only recently launching new ad-supported tiers to their platforms. However, Amazon's leading market share in streaming could give it an edge in the space, allowing it to attract advertisers more easily. Amazon's business is expanding quickly, and despite recently hitting a new high in its share price, the company likely has much more to offer investors over the long term. Meanwhile, its price-to-sales ratio of 3.5 suggests its stock is trading at a value, making it too good to pass up this July. The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now... and Amazon wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $780,654!* Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*. 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. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Dani Cook has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Netflix, Walt Disney, and Warner Bros. Discovery. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy. The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.