This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.
After touching a multi-year low of around $84 in early 2023, Amazon's (NASDAQ: AMZN) stock price has more than doubled to $200 (as of this writing), thanks to the improvement in financials.
As the company moves forward on tailwinds such as artificial intelligence (AI) and facing headwinds such as the e-commerce slowdown, investors may wonder: Is now the time to buy, hold, or sell Amazon stock?
Let's take a closer look.
How did Amazon perform in 2024?
First, a review of Amazon's recent performance, focusing on its 2024 performance. Overall, it was a solid year for several reasons.
Amazon expanded revenue by 11% to $638 billion, thanks to growth across all three major segments. North America was up by 10%, International was up by 9%, and Amazon Web Services (AWS) was up by 19%. While an 11% revenue growth rate is not unusually high, it is still remarkable considering the scale that Amazon operates in.
Moreover, while its top-line growth was solid, the highlight of Amazon's performance in 2024 was the massive improvements in its bottom line. Operating profit jumped 86% from $36.9 billion to $68.6 billion, due to profit growth across all segments. The rapid margin expansion demonstrates the giant's strong execution capabilities in managing its costs and the benefits of operating leverage.
Operationally, Amazon continued to improve delivery speeds, with more than 65% more items delivered to Prime members the same day or overnight than in the fourth quarter of 2023. It also launched Amazon Haul, a new ultra-low-price shopping service in the U.S., to compete against low-cost players like Temu and Shein.
Similarly, in its cloud computing business (AWS), the tech company delivered good progress in 2024, such as introducing its new Trainium2 AI chip, establishing its foundation models in Amazon Nova, and creating new models and features in Amazon Bedrock that give customers flexibility and cost savings. All these innovations help position the company in the ongoing AI race.
In other words, despite its size, the tech giant is still executing well to delight its users and maintain its share in key markets.
What are Amazon's prospects in the coming years?
Amazon might have become a household name thanks to the success of its e-commerce business, but the most significant growth drivers in the next few years will likely come from other segments.
The biggest winner will likely be AWS, which rides on megatrends like AI advancement and the ongoing migration to the cloud. For instance, the global AI market is expected to grow from $294 billion in 2024 to $1.772 billion by 2032, a compound average growth rate of 29%. As the most significant cloud computing player globally with a 30% market share, AWS is primed to benefit from this once-in-a-generation trend.
Another business gaining traction (which could accelerate further in the coming years) is Amazon's advertising business. Centered around Prime Video and Amazon Search, the advertising business generated $14 billion in revenue in the first quarter of 2025, up 18% year over year. This segment grew even faster than AWS (up 17% in the same quarter). Like AWS, advertising is a high-margin business, which will likely contribute to a margin expansion for the giant over time.
Unlike the previous two businesses, the e-commerce segment could see a mixed performance in the coming years. On the positive end, Amazon can leverage its massive scale to gain market share from traditional brick-and-mortar shopping and expand in emerging markets like India. The downside is that it has to deal with the uncertainties of tariffs and emerging competitors like Temu and Shein. So, while Amazon is still favorably positioned to grow its e-commerce business, the e-commerce prospects will not be as straightforward as those of AWS and the advertising business.
Still, while the prospects may differ for Amazon's various business segments, it is essential to highlight that the company has an unusual culture centered around its "Day 1" mentality. This mentality focuses on customer obsession, embracing new trends, willingness to experiment and fail, and avoiding bureaucracy.
As long as the company can maintain this culture, it is well-positioned to continue growing in the years to come, albeit at a slower pace, given its already enormous size.
Is Amazon's stock cheap?
Here's another factor that investors should consider before making a move in Amazon's stock: The stock valuation in relation to its past. Here, let's use price-to-sales (P/S) as a proxy.
Amazon's P/S ratio has ranged from 1.7 to 4.6 times in the last five years. As of this writing, it is 3.3 times, just around the middle of that range.
The current valuation suggests that while Amazon's stock is not a bargain today, it is not excessively priced compared to its past valuation.
What it means for investors
Amazon delivered strong results in 2024, highlighting the strength of its execution capabilities.
Its high-margin segments -- AWS and advertising -- will drive future growth, supported by trends like AI adoption. While e-commerce faces mixed prospects, Amazon's Day 1 culture will likely keep it competitive for the foreseeable future.
So, while the stock is not a screaming buy today, it is not a sell. Existing investors should hold on to the stock, while investors with a long-term horizon could consider buying a small position and adding to that position over time.
This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.
