Up Just 2% and Still Dominant: Is Amazon the 1 Growth Stock Worth Buying Right Now?

Amazon (NASDAQ: AMZN) has richly rewarded investors over the years. However, its more recent performance has left something to be desired.

The shares gained 2.5% over the last three months through July 31. Large-cap stocks, as measured by the S&P 500 index, gained 3.9%. Amazon also trailed growth stocks, with the S&P 500 Growth index increasing 4.2%.

Has the market underappreciated Amazon's growth prospects?

Image source: Getty Images.

Investing for the long run

Amazon commands a large share of the online retail marketplace. This includes nearly 36% of U.S. e-commerce sales in 2025.

These are part of the North American and international segments, which produced 79% of first-half sales, but only 40% of Amazon's operating profit.

Fortunately, Amazon relies on the fast-growing, high-margin Amazon Web Services (AWS) business for the bulk of its profit. The cloud-computing business has done well as organizations clamor for data. With the rapid growth of generative artificial intelligence, its data centers became even more relevant.

Competition remains limited due to the enormous resources needed to build and maintain these large data centers. AWS has the leading market share in this fast-growing area, at 28% as of the first quarter. That's followed by Microsoft's Azure at 21% and Alphabet's Google Cloud at 14%. The remaining participants have 4% or less of the market.

AWS continues to grow its sales rapidly. That includes a 36.8% year-over-year gain in the second quarter to $42.2 billion, driving a 63.6% increase in operating income to $16.6 billion.

Is the stock a buy?

With the company's dominant position in cloud computing and online retail, why has the stock lagged the market lately? Investors got spooked by management's spending plan, including a projected $220 billion in capital expenditures this year. That's an increase from $131.8 billion in 2025, and higher than the anticipated $200 million outlined earlier in the year. But with management investing to meet demand, this seems like a sound strategy.

Meanwhile, the sluggish stock price movement created a better valuation for investors. Over the last year, the price-to-earnings (P/E) ratio dropped from 35 to 22. That's less than half the five-year median of 50. Amazon's stock also trades at an attractive valuation compared to the S&P 500's P/E ratio of 29.

It's rare when a company with dominant market positions, including in the fast-growing cloud-computing business, trades at a discount, both historically and relative to the market. That makes Amazon shares a compelling buying opportunity.

Lawrence Rothman, CFA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, and Microsoft. The Motley Fool has a disclosure policy.