Prediction: This Is What Amazon's Stock Will Be Worth by 2030

Key Points

• AWS and advertising services are driving rapid growth with high profitability.

• Amazon's operating profits growth is the key metric investors should focus on.

• 10 stocks we like better than Amazon ›

Amazon (NASDAQ: AMZN) is one of the world's most recognizable companies. Its e-commerce platform is responsible for delivering billions of dollars worth of goods every year in over 100 countries around the globe, and has led the e-commerce revolution. However, the e-commerce shift has largely played out, and with artificial intelligence (AI) investing dominating the market, it may seem like Amazon stock is out of favor.

But that's not the case. Amazon is also heavily involved in the AI arms race and has another exciting division that's driving impressive growth. The combination of a strong base business alongside a couple that are growing rapidly can lead to long-term outperformance, making Amazon an intriguing stock to buy now.

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But what kind of growth can Amazon investors expect by 2030? Let's find out.

Image source: Getty Images.

Two divisions are driving Amazon's outsize profit growth

Amazon's commerce divisions are well known, but there is a fact that's not as widely known: This business isn't as profitable as one might think. In Q2, Amazon's North American commerce divisions generated $7.5 billion in operating profit on sales of $100 billion. However, most of that profit likely comes from one unlikely source: digital advertisements.

Amazon's advertising services divisions have been rapidly growing behind the scenes, and are a large reason why Amazon's operating profits have improved over the past few years. In Q2, ad services revenue rose 23% year over year, making it the fastest-growing division within Amazon. While Amazon doesn't break out the individual operating margins per segment, this division likely has impressive margins. Another advertising-focused business, Meta Platforms, has consistently delivered operating profits between 30% and 45% over the last five years. That's quite a bit higher than Amazon's divisionwide operating margin of 7.5%, so it's likely that the faster advertising service growth rate will continue to improve Amazon's operating profits.

One division where Amazon breaks out the operating margin outside of commerce is Amazon Web Services (AWS), its cloud computing division. AWS is the world's largest cloud provider, having experienced several years of impressive growth. It's also benefiting from the AI arms race, as several clients lack the resources to build their own data centers for training and running AI models, so they rent them from AWS.

AWS' operating margins are significantly better than those of its commerce siblings, as it reported an impressive 33% operating margin. That's down from Q1's 39% margin, but it makes sense considering how much money AWS is spending to build out increased computing capacity due to massive demand.

Cloud computing is expected to be a massive growth trend over the next few years, with Grand View Research estimating that the global cloud computing market will expand from $752 billion in 2024 to $2.39 trillion by 2030. That's massive growth, and shows that AWS will continue to be a strong profit driver for Amazon over the next five years.

With two strong growth trends propelling Amazon's profits higher, what will Amazon's stock price be five years from now?

Amazon could be a $500 stock by 2030

In Q2, Amazon's operating profits increased by 31%. This is a significantly slower rate of growth than it was previously, but with the outsize growth of highly profitable divisions like AWS and its ad services, I believe this is a sustainable growth rate through 2030. To account for some conservatism, we will use a 20% growth rate.

Data by YCharts.

If Amazon can continue growing its operating profits by 20% through 2030, that indicates $210 billion in operating profits by the end of 2030. That's a 172% increase from today's levels.

As long as Amazon's valuation today is reasonable (it's somewhat pricey at 32 times operating profits), its growth would be similar to its stock price growth. If we project Amazon to trade at 25 times operating profits, that would give the company a $5.3 trillion market cap, or a stock price of $492.

So, even with a lot of conservatism baked in (a lower growth rate than I think is possible and a decreased valuation), Amazon has the potential to be nearly a $500 stock by 2030. That's more than a double in under six years, making it a great stock to buy now and hold over the next few years.

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Keithen Drury has positions in Amazon and Meta Platforms. The Motley Fool has positions in and recommends Amazon and Meta Platforms. The Motley Fool has a disclosure policy.