Amidst the ongoing market volatility and the uncertainty surrounding the economy, it is not easy to pick stocks. While investors are trying to play safe, the market slowdown has become a solid opportunity to load up on long-term winners. If you are a low-risk investor, consider buying quality stocks in a pullback and holding them for a few years.
Weak market sentiment, concerns about tariffs, and unexpected economic data have led some of the top tech stocks to drop. Amazon.com Inc. (NASDAQ: AMZN | AMZN Price Prediction) is one of them. The e-commerce company’s stock enjoyed a wild ride in 2024 but has been on a downward journey since February.
Key points in this article:
- Amazon is a rock-solid business to own for the next three to five years.
- The current dip is a good chance to load up on the stock.
- If you are looking for more AI stocks to build your portfolio, get your hands on the brand-new “The Next NVIDIA” report. It features one stock which has 10x potential.
The current dip is temporary
Based in Seattle, the company went public in 1997 and offers many products and services. It has a presence across multiple industries and is steadily expanding its offerings. It has been growing the same-day delivery services, investing in artificial intelligence, and is on its way to becoming a leader in the entertainment space as well.
Amazon has completed four stock splits till now and the most recent one was in 2022 when the stock was trading well above $2,000. After the split, it started trading for $120. While one mustn’t expect a split this year, it is one no-brainer stock split stock worth buying with $500 and holding for the long term.
I believe Amazon can keep growing and it will continue rewarding shareholders. Exchanging hands for $199, Amazon stock is down from an all-time high of $242 and has lost 14% value in a month. Despite reporting impressive fundamentals, the stock has been sliding downward. But the dip could be temporary.
Premier business to own
Amazon is a mature business with a solid global presence. The company ended 2024 with a revenue of $638 billion, an 11% year-over-year jump, and reported an operating income of $68.6 billion.
The two biggest revenue generators for the company are Amazon Web Services (AWS) and the advertising segment. In the fourth quarter, AWS generated a revenue of $28.8 billion and the advertising segment reported $17.3 billion. The e-commerce company has emerged as an advertising leader in the industry and it has steadily seen an improvement in ad revenue. Marketers will be willing to spend on ads in order to reach the massive user base that Amazon has.
Despite the strong numbers, the company gave a weak revenue guidance which disappointed investors. While the company is touted as a strong e-commerce giant, the majority revenue comes from cloud computing. The segment alone manages to contribute 50% to the operating income. AWS remains in the growth phase and the right tools will enhance AWS’ customer appeal, leading to higher revenue.
Amazon has been spending billions of dollars on artificial intelligence and expects a capital expense of $100 billion in 2025. It will spend this amount towards AWS and for providing support demand for their AI services. The rising competition in the AI industry has made it essential for tech giants to bolster their capital expense towards AI research and development.
Amazon’s future is bullish
Amazon will continue to remain an e-commerce industry leader which will add profits to the business. It is not easy for any company to compete with the strong position that Amazon holds in the e-commerce segment. Additionally, its growing investments in the AI segment could boost AWS revenue and help achieve a higher market share in the next two to three years. Lastly, the advertising segment will continue to grow as businesses expand their marketing budgets. We could see an improved margin in the segment this year.
For the long term, Amazon is one of the best AI stocks to own. It can weather any storm, has a rock-solid balance sheet, and is a premier business to add to your portfolio. Wall Street is bullish on the stock with an average price target of $270, a 35% upside.
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