Where Will Amazon Stock Be in 3 Years?

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Where Will

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Stock Be in 3 Years?

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’s (NASDAQ: AMZN) business has changed dramatically in the past few years. The e-commerce giant has more than doubled its shipping infrastructure since 2021, expanded its cloud services division, and boosted profitability. Those successes helped push the stock to all-time highs at a valuation of $2 trillion as of mid-October.

It’s hard to see how the next several years could bring as much good news to shareholders. But

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still has a long runway ahead for both growth and profit expansion. With that positive fact in mind, let’s look into the factors likely to drive

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’s stock returns over the medium term.

Most of the recent enthusiasm around the stock can be tied to

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’s success in the

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Web Services (AWS) platform that powers most of its earnings. Companies slowed their pace of new spending commitments on cloud services in 2022, but they’re now back to aggressively moving work onto the cloud. That’s great news for AWS, which nearly doubled its earnings in the first half of 2024. Operating income jumped to $19 billion, year over year.

This segment will be volatile over the next few years, which is to be expected when your business depends on broader IT spending trends. Yet the stock should see a lift from AWS as that

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continues competing against rivals like

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and its Azure platform.

Meanwhile, look for the e-commerce segment to contribute more toward annual earnings by 2027.

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added hundreds of fulfillment and distribution centers since 2020 to handle higher e-commerce demand. That intense spending level won’t need to be repeated in the next several years, even as sales volumes keep expanding. In other words,

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could finally start generating significant profits from its retailing segment.

Sure, the e-commerce business will likely matter less to the bottom line by 2027, thanks to faster growth in AWS. But the retailing segment still makes

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a less risky business and gives the company a huge platform from which it can launch products and services.

The biggest question going forward is to what extent

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can keep allowing profit margins to expand without shortchanging its growth investments. In the past year or so, spending in AWS hasn’t offset slower capital investments on the retailing side. As a result, the company is close to generating a double-digit operating profit after barely breaking even on this metric for decades.

AMZN Operating Margin (TTM) Chart

There’s a good chance that profitability will keep climbing toward 15% of sales in the next few years, assuming continued IT spending. That optimistic scenario could see

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shareholders accruing market-thumping returns, even from the company’s current $2 trillion market cap level.

Story Continues

On the other hand, shrinking tech budgets might send

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’s profit margin back down toward the low single digits, at least temporarily. The company might also find other large growth initiatives that won’t pay off for many years. These scenarios would mean weaker returns for this tech stock.

Yet the best news for investors is that

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has ample cash flow that can help see it through a downturn. And its core growth markets have many more years of gains ahead. E-commerce makes up just 16% of total retailing today, compared to less than 1% when

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went public in 1997. That’s why even a ******* of below-average returns shouldn’t shake investors’ long-term confidence in this business.

Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.

On rare occasions, our expert team of analysts issues a

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recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:

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: if you invested $1,000 when we doubled down in 2010, you’d have $21,285!*

Apple: if you invested $1,000 when we doubled down in 2008, you’d have $44,456!*

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: if you invested $1,000 when we doubled down in 2004, you’d have $411,959!*

Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.

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*Stock Advisor returns as of October 21, 2024

John Mackey, former CEO of Whole Foods Market, an

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subsidiary, is a member of The Motley Fool’s board of directors.

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has positions in

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. The Motley Fool has positions in and recommends

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and

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. The Motley Fool recommends the following options: long January 2026 $395 calls on

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and short January 2026 $405 calls on

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. The Motley Fool has a

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.

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was originally published by The Motley Fool

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#

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#Stock #Years

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