Is Amazon Stock at $255 a Share an Obvious Buy Right Now?
Key Points
Amazon is on track for $220 billion in capital expenditures this year, up from $132 billion in 2025.
Its P/E ratio is now at 21, a level that might have been unthinkable a few years ago.
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Amazon (NASDAQ: AMZN) trades at just above $255 as of the time of this writing. Despite its strengths in e-commerce, cloud computing, and now artificial intelligence, its stock has gained little traction this year.
This situation may leave investors wondering what's wrong with Amazon stock. Has it just paused before resuming its upward move, or is it a stock investors should hold or avoid?
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Before answering that question, investors should ponder both the potential and the costs of its AI expansion. Although the company is in a strong position to lead in AI, capturing that business has come at an enormous cost.
Amazon forecast $220 billion in capital expenditures (capex) for this year, up from $132 billion in 2025. As a result, the company has borrowed tens of billions of dollars despite its $123 billion in liquidity. Also, it has reported a negative free cash flow of $7.6 billion over the trailing 12 months, a dramatic drop from the tens of billions in yearly free cash flow generated in the past.
Nonetheless, Amazon continues to drive growth from its e-commerce segments. Also, the aforementioned liquidity and cash-generating ability should help it survive even if the worst fears of an AI bust materialize.
That spending has likely accelerated Amazon's revenue growth. Yearly net sales growth was 20% in the second quarter of 2026, up from 13% one year ago. That includes the cloud computing business Amazon Web Services, whose annual growth rate surged from 17.5% to 37% over the same period. Furthermore, its P/E ratio has fallen to 21, a low level considering how the stock thrived in previous years when it typically sold for above 50 times earnings.
Indeed, the consumer discretionary stock could struggle for a time if the AI spending becomes untenable or difficult to justify. However, with its strong financial position and leadership in e-commerce and the cloud, Amazon is likely a long-term buy at $255 per share.
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Will Healy has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon. The Motley Fool has a disclosure policy.
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