Stock market outlook 2025: is Amazon stock a buy, sell or hold?

Amazon stock (NASDAQ: AMZN) has consistently delighted investors over the years. Over the past five years, the stock has risen by 118%, outpacing the S&P 500 by approximately 22 percentage points. Given the company’s long-term growth potential and valuation, is this trend likely to continue?

Amazon Web Services Performance

Amazon Web Services (AWS), the company’s cloud computing division, might not be the first thing that comes to mind when thinking of Amazon, but it remains well-positioned for continued revenue and profit growth.

AWS operates large data centers that assist organizations in leveraging data for improved decision-making. This sector is experiencing rapid growth, and AWS holds the largest market share, estimated at 31% in the first quarter. Its main competitors, Microsoft’s Azure and Alphabet’s Google Cloud, hold 25% and 11% shares, respectively. Amazon continues to invest in areas like machine learning and artificial intelligence to strengthen its competitive advantage.

AWS is performing exceptionally well, with second-quarter sales rising 18.7% to $26.3 billion. Although it represents only 18% of Amazon's total sales, it contributes a significant 64% of operating income, boasting a 35.5% operating margin—substantially higher than both the North American and international segments.

Amazon’s Other Businesses

Amazon’s various other segments are also experiencing sales growth, including online retail, subscription services, and advertising.

In North America, sales rose by 9% to $90 billion, while operating profit jumped nearly 58% to $5.1 billion. The international segment saw revenue increase by 7% to $31.7 billion, turning a profit of $273 million compared to an $895 million loss the previous year.

Sales growth was strong across multiple categories, but advertising has been particularly robust, showing at least 20% growth for several consecutive quarters. In the second quarter alone, advertising revenue increased by 20% to $12.7 billion. Amazon has become an attractive platform for advertisers due to its large user base and the data it provides for targeted marketing.

Looking ahead, management anticipates third-quarter sales to be between $154 billion and $158.5 billion, reflecting year-over-year growth of 8% to 11%. They have projected operating income in a wide range of $11.5 billion to $15 billion, representing an increase of 3% to 34% compared to $11.2 billion in the same period last year.

How to trade Amazon stock?

Amazon stock price increased 44.6% over the last year, easily besting the S&P 500's 34.4%. The company, once known for entering markets and growing sales while reporting losses, has become hugely profitable. And the market continues to approve of the company's performance.

Investors are optimistic about Amazon's continued strong performance, expecting its shares to surpass overall market growth based on the current valuation. Amazon's price-to-earnings (P/E) ratio stands at 45, compared to 30 for the S&P 500.

While this valuation leaves little margin for error, the highly profitable AWS segment is well-positioned to capitalize on significant market opportunities. Coupled with its popular shopping platform, known for convenience, competitive pricing, and easy returns, Amazon's other businesses are likely to maintain robust growth.

Given these factors, despite the relatively high valuation, investors would consider purchasing shares at this time.

When considering shares, indices, forex (foreign exchange) and commodities for trading and price predictions, remember that trading CFDs involves a significant degree of risk and could result in capital loss.

Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice.