Is Amazon Stock Still a Buy After Hitting All-Time Highs?
Key Points
AWS is enjoying robust multiyear revenue visibility.
Advertising is also becoming a key profit engine.
Amazon’s shares can continue to soar even above their all-time high levels.
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Shares of Amazon (NASDAQ: AMZN) are hovering close to an all-time high of $254.
Image source: Amazon.
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But several growth catalysts can propel Amazon stock above its current price and potentially surpass its all-time high in the coming months.
Improving demand visibility
Amazon's cloud computing platform, AWS, saw revenues grow 20.2% year over year to $33 billion in the third quarter. The rapid increase in enterprise spending on artificial intelligence (AI) infrastructure has pushed AWS' backlog to $200 billion, giving it exceptional multiyear revenue visibility.
Amazon's custom silicon chips, such as Graviton and Trainium, have strengthened AWS' price-performance advantage relative to hyperscalers, depending heavily on third-party chips. The company also plans to double data center capacity by 2027, which can further reduce costs and attract even larger workloads.
Amazon expects capital investment of $125 billion in 2025, and plans to invest even higher amounts in 2026, primarily to expand its AI infrastructure.
Advertising and retail business
Advertising has become the second most prominent growth engine. Advertising revenues increased 22% year over year to $17.7 billion in the third quarter, driven by the strong performance of its full-funnel advertising portfolio encompassing every stage of the customer purchase journey.
Advertising through Prime Video and live sports capabilities helps build brand awareness at scale, while advertising through sponsored products at the point of sale improves conversion rates. The company's partnerships with premium content providers, such as Netflix, Spotify, and Sirius XM, enable advertisers to access high-quality ad inventory through Amazon's demand-side platform (DSP).
TD Cowen analyst John Blackledge expects advertising to bring $68 billion in revenues and account for 35% of the company's total operating income in 2025. So although it's a smaller part of the total revenues, advertising is more profitable than AWS or the retail business.
Amazon's stock has reached an all-time high, yet it appears to be entering a new phase of accelerated growth. The stock can still be a good choice for long-term investors who can overlook share-price pullbacks due to profit-taking in the short term.
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Manali Pradhan, CFA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Netflix, and Spotify Technology. The Motley Fool has a disclosure policy.
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