Shares of Amazon closed the week looking unusually cheap. With its share price dipping and long-term growth potential still strong, investors might be looking at a solid buying opportunity.
Amazon’s low valuation makes it attractive
Amazon’s valuation is now at levels rarely seen since it went public in 1997. The stock trades around 30 times its estimated future earnings, which is lower than other retail competitors like Walmart and Costco — companies that historically had lower multiples.
The drop in valuation is largely due to Amazon’s focus on efficiency and cost-cutting, which included tens of thousands of employee layoffs from 2022 to 2024. Those dramatic moves helped boost the Magnificent 7 tech giant’s profitability.
However, a broader correction in the stock market also continues to weigh down the stock’s price. Year to date, Amazon shares are down 12.49 percent, underperforming the tech-heavy Nasdaq 100. The stock has hovered around or below $200 per share for much of March.
Analysts are still bullish on Amazon
Despite the short-term turbulence, Wall Street remains overwhelmingly optimistic about Amazon’s e-commerce and cloud-computing businesses. Over 97 percent of analysts tracked by TipRanks recommend buying, and the stock trades about 37 percent below the average analyst price target.
Time has rewarded long-term holders of Amazon stock before. Since March 27, 2020, the stock has gained 103 percent, averaging out to a little over 20 percent a year — albeit with bumps along the way, including during the 2022 bear market.
Amazon’s growth potential remains strong
Amazon’s future growth is backed by a wide web of revenue streams, including online retail, Amazon Web Services (AWS), advertising, digital media, AI, robotics and more.
The company recently launched an AI-powered Alexa upgrade, which analysts see as a potential profit boost. Amazon expects total Q1 2025 net sales to rise between 5 percent and 9 percent year-over-year.
Amazon’s long-term AI play
AWS revenue grew 19 percent last quarter but fell short of some bullish analyst expectations. Like Microsoft, Amazon is struggling to meet surging AI demand — and facing growing impatience from investors, eager to see the company’s AI play start to pay off. Last month, Amazon announced plans to pour another $100 billion into AI-related investments in 2025, including data centers.
While these costs could pave the way for bigger profits down the road, investors are watching closely to see more solid returns from Amazon’s massive AI investment. Broader market volatility fueled by potential tariff war impacts could also keep big tech stocks like Amazon under pressure over the short term, despite encouraging fundamentals.
Bottom line
Amazon’s stock is trading at what could be a rare discount. However, short-term headwinds — including AI investment concerns and broader economic volatility — could limit the stock’s immediate upside. Investors betting on Amazon now will need to commit to playing the long game.
Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation.
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