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

Amazon (NASDAQ: AMZN) is known for its online store, but its investments in cutting-edge technologies like cloud computing and artificial intelligence (AI) are future-proofing the business for tomorrow's economy.

While tariffs, inflation, and soft consumer spending could weigh on Amazon stock in the near term, there are three reasons it's a no-brainer buy for a long-term investor right now.

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1. Amazon is a growth machine

The global e-commerce market is massive, valued over $6 trillion and growing, according to eMarketer. This still gives Amazon a lot of opportunity for long-term growth, but investors should think of Amazon as more of a tech-driven, services business.

Despite Amazon's dominant position in the U.S. e-commerce market, online retail sales only account for 42% of its business. The majority of its revenue comes from various services, including cloud computing (Amazon Web Services), online advertising, subscriptions, and third-party fulfillment services. These revenue streams are growing much faster than Amazon's online store, increasing 15% to reach $370 billion in 2024.

Analysts project Amazon's total revenue to reach $847 billion by 2027, which will be driven by growing demand for Amazon Web Services and retail media advertising on Amazon's online store. These lucrative opportunities explain why investors place such a high value on Amazon's business, with its market cap (share price times total shares outstanding) currently sitting at over $2 trillion.

2. Technology is strengthening Amazon's business

Cloud services and AI are shaping Amazon's future. Amazon Web Services (AWS) is the leader in the cloud market, with $107 billion in trailing revenue. This is Amazon's fastest-growing business, with AWS revenue surging 19% year over year in Q4 2024.

The AI capabilities Amazon built for its cloud business are also benefiting its e-commerce operation. Since Amazon's acquisition of Kiva Systems in 2012, it has deployed over 750,000 robots across its operations. Its Sequoia robotics system uses AI and computer vision to more efficiently manage inventory and process orders. Faster order processing means higher inventory turnover, happy customers, and more sales opportunities.

Amazon's technology investments are fueling innovations behind the scenes that are ultimately strengthening its competitive advantage and growing the value of the business for shareholders. This is evident in the explosive growth of Amazon's net income and operating cash flow.

3. Wall Street is undervaluing Amazon's growing cash flow

The company's net income nearly doubled last year to $59 billion. This brings the stock's price-to-earnings multiple down to 35, which might look expensive, but it seems about right for a company with attractive prospects in cloud computing and AI.

Perhaps a better way to gauge the value of the stock is looking at Amazon's growing cash flow from operations. Other than a dip in 2021, cash from operations (CFO) has steadily grown over the last 10 years. it grew 36% to reach a record $115 billion last year. This has brought the stock's price-to-CFO multiple down to 18, well below its 10-year average multiple of 27.

The stock could climb 50% by returning to its previous average valuation multiple on a CFO basis. Cost reduction efforts in Amazon's retail business are providing more cash for management to invest in data centers and AI to stay on the cutting-edge of technology. Amazon seems unstoppable, and the stock's valuation looks very attractive to start a position today.

Should you invest $1,000 in Amazon right now?

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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. John Ballard 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.