3 Reasons to Buy Amazon Stock Like There's No Tomorrow

It's been a tough past few weeks for Amazon (NASDAQ: AMZN) shareholders. The stock's down more than 30% from its early February peak and is still testing the waters of new multi-month lows. Blame worries of tariff-prompted economic weakness, which have been a drag on the entire market. High-profile Amazon was just one of the bears' top targets.

Just remember that investors' collective assumptions aren't always correct. Indeed, the market might be completely misjudging Amazon's future here.

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With that as the backdrop, here are three specific reasons interested investors should plow into Amazon stock while it's on sale.

1. Its biggest and best profit center is resilient

You probably think of Amazon as an e-commerce company that also manages a cloud computing venture. And your assessment is basically right. Not only are this organization's roots in the online shopping arena, but about 80% of its top line stems from the sale of physical goods and related services, such as Prime. Only about a fifth of its revenue is generated by its cloud computing arm, Amazon Web Services, or AWS.

In terms of profits, though, these proportions are roughly reversed. This company's e-commerce arm only accounts for about 40% of its operating income, while AWS makes up nearly 60% of Amazon's bottom line.

Data source: Amazon Inc. Chart by author. Figures are in billions.

And this matters.

See, while newly enacted tariffs might strain the consumer demand behind Amazon's e-commerce business, cloud computing isn't nearly as vulnerable. Institutions need their cloud solutions, and increasingly so. Industry research outfit Canalys believes worldwide spending on cloud infrastructure will grow by 19% this year, a prediction made after the tariff wars began. Already being the cloud market's leader, Amazon is positioned to win at least its fair share of this growth, maintaining the company's healthy overall profit growth.

2. Tariffs won't be devastating and might even help

But tariffs? It would be naïve to ignore their potential impact on Amazon's e-commerce business. They won't necessarily be devastating, though. Indeed, in some ways, the new tariff laws might even help.

First things first. Sure, Amazon has something to lose here. While plenty of nations are coming to the negotiating table to find tariff rates that work for the parties on both sides of the table, the tariff standoff between China and the U.S. remains unresolved. It matters simply because 25% of Amazon's own private-label merchandise is sourced from China, according to research from Morgan Stanley. Barring any changes to the status quo, the cost of those goods is going up sooner rather than later. Presumably, Amazon's third-party sellers are similarly reliant on Chinese-made goods that will also soon cost considerably more.

It's short-sighted, however, to think that Amazon is stuck with China for its own in-house-branded merchandise. Although finding alternative manufacturers may require a bit of work here, plenty of countries other than China are capitalizing on the opportunity to fulfill this diverted demand.

There's even a double-barreled case to be made that new tariff rules could help Amazon.

The first of these prospective upsides is the potential uptick in demand for lower-cost goods. If a recession does end up forcing consumers here and abroad to pinch their pennies even tighter and shop around for the lowest prices on consumer goods, Amazon can win plenty of those battles.

As for the other upside, if you believe that Shein and PDD's (NASDAQ: PDD) Temu are at least partially disrupting Amazon's tight hold of the U.S. e-commerce market, also know this: President Donald Trump's new tariff rules essentially nullify the tariff exemption for packages valued at less than $800 entering the U.S. This, of course, is a major piece of Temu's and Shein's business.

3. Analysts are (extremely) on board

Finally, while the stock's recent weakness makes enough superficial sense (investors panicked when the threat of tariffs became reality), it's worth noting that the analyst community isn't nearly as worried. At least not yet. The vast majority still rate Amazon stock not just as a buy but as a strong buy. And their average price target of $254.14 is a hefty 52% above this stock's current price. That's not a bad way to start out a new trade.

So, why didn't the professionals flinch along with most investors? Well, to be fair, some did. Deutsche Bank's Lee Horowitz dramatically reduced his price target from $287 to $206 per share, for instance, explaining that the most likely scenario ahead could drag this year's per-share profit down to the tune of 15%.

Horowitz's concerns are the exception to most of the rhetoric and analysis, though. As Citizens JMP analyst Nicholas Jones notes, "Its [Amazon's] exposure to consumer staples, and focus on pricing and convenience, should help mitigate discretionary spending headwinds on its e-commerce business." He adds, "We believe the size and strength of AWS and its advertising business within their respective verticals will likely lead to continued share gains, regardless of the economic environment," echoing sentiment from several other analysts.

This bullishness hasn't helped to avert a sell-off; pessimistic individuals as well as institutional investors are obviously calling the shots right now. The analyst community is arguably more level-headed, however, seeing the bigger picture more clearly than the crowd that feels compelled to play defense in this environment.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. James Brumley 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.