Does Amazon.com Stock Have Room for Growth?

Amazon.com (NASDAQ:AMZN) stock has climbed 4% this year, a bit behind the S&P 500’s 7% gain. This slight underperformance largely stems from a combination of valuation concerns and the company’s substantial investment cycle.

After pouring $53 billion into capital expenditures in 2023 and $83 billion in 2024, Amazon is now projecting a massive $100 billion spend this year, primarily focused on building out its AI capabilities. These significant investments, while impacting short-term profitability, are crucial for Amazon’s long-term growth and competitive edge.

With AMZN currently trading at $230, the key question for investors is clear: should you buy, sell, or hold? We believe there’s more upside potential for AMZN stock from its current levels. We’ve reached this conclusion by comparing AMZN’s current valuation against its recent operating performance and its present and historical financial condition. Our in-depth analysis of Amazon.com across key parameters—Growth, Profitability, Financial Stability, and Downturn Resilience—reveals a company with strong operating performance and a solid financial foundation, as detailed further below.

That said, if you seek upside with lower volatility than individual stocks, the Trefis High Quality portfolio presents an alternative — having outperformed the S&P 500 and generated returns exceeding 91% since its inception. Separately, see – Block Inc.: What’s Happening With XYZ Stock?

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How Does Amazon.com’s Valuation Look vs. The S&P 500?

Going by what you pay per dollar of sales or profit, AMZN stock looks expensive compared to the broader market.

• Amazon.com has a price-to-sales (P/S) ratio of 3.7 vs. a figure of 3.1 for the S&P 500
• Additionally, the company’s price-to-free cash flow (P/FCF) ratio is 116.8 compared to 20.9 for S&P 500
• And, it has a price-to-earnings (P/E) ratio of 36.9 vs. the benchmark’s 26.9

How Have Amazon.com’s Revenues Grown Over Recent Years?

Amazon.com’s Revenues have seen notable growth over recent years.

• Amazon.com has seen its top line grow at an average rate of 10.8% over the last 3 years (vs. increase of 5.5% for S&P 500)
• Its revenues have grown 10.1% from $591 Bil to $650 Bil in the last 12 months (vs. growth of 5.5% for S&P 500)
• Also, its quarterly revenues grew 8.6% to $156 Bil in the most recent quarter from $143 Bil a year ago (vs. 4.8% improvement for S&P 500)

How Profitable Is Amazon.com?

Amazon.com’s profit margins are worse than most companies in the Trefis coverage universe.

• Amazon.com’s Operating Income over the last four quarters was $72 Bil, which represents a poor Operating Margin of 11.0%
• Amazon.com’s Operating Cash Flow (OCF) over this period was $114 Bil, pointing to a good OCF Margin of 17.5% (vs. 14.9% for S&P 500)
• For the last four-quarter period, Amazon.com’s Net Income was $66 Bil — indicating a moderate Net Income Margin of 10.1% (vs. 11.6% for S&P 500)

Does Amazon.com Look Financially Stable?

Amazon.com’s balance sheet looks strong.

• Amazon.com’s Debt figure was $133 Bil at the end of the most recent quarter, while its market capitalization is $2.4 Tril (as of 7/21/2025). This implies a strong Debt-to-Equity Ratio of 5.5% (vs. 19.4% for S&P 500). [Note: A low Debt-to-Equity Ratio is desirable]
• Cash (including cash equivalents) makes up $95 Bil of the $643 Bil in Total Assets for Amazon.com.  This yields a strong Cash-to-Assets Ratio of 14.7%

How Resilient Is AMZN Stock During A Downturn?

AMZN stock has seen an impact that was slightly better than the benchmark S&P 500 index during one of the recent two downturns. Worried about the impact of a market crash on AMZN stock? Our dashboard How Low Can Amazon.com Stock Go In A Market Crash has a detailed analysis of how the stock performed during and after previous market crashes.

Inflation Shock (2022)

• AMZN stock fell 56.1% from a high of $186.57 on 8 July 2021 to $81.82 on 28 December 2022, vs. a peak-to-trough decline of 25.4% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 11 April 2024
• Since then, the stock has increased to a high of $242.06 on 4 February 2025 and currently trades at around $225

COVID-19 Pandemic (2020)

• AMZN stock fell 22.7% from a high of $108.51 on 19 February 2020 to $83.83 on 12 March 2020, vs. a peak-to-trough decline of 33.9% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 14 April 2020

Putting All The Pieces Together: What It Means For AMZN Stock

In summary, Amazon.com’s performance across the parameters detailed above are as follows:

• Growth: Very Strong
• Profitability: Weak
• Financial Stability: Very Strong
• Downturn Resilience: Neutral
  
• Overall: Strong

Overall, Amazon.com has demonstrated strong performance across key metrics. From a price-to-sales (P/S) perspective, a ratio of 3.6 times trailing revenues, coupled with low double-digit revenue growth, appears reasonable to us.

While AMZN’s current price-to-earnings ratio might seem a bit high, we anticipate a stronger growth trajectory in the coming years. This is largely due to the increasing contribution of Amazon Web Services (AWS), its more profitable cloud computing business, to the overall revenue mix. Related – Amazon Stock: Path To 2x Growth.

Given these factors, we believe there’s still considerable upside potential for AMZN stock from its current levels. Of course, our assessment could be incorrect. Investors might be hesitant to assign a higher valuation multiple, especially considering Amazon’s substantial capital expenditures, intensifying competition, and slower-than-expected growth in certain business segments.

Nevertheless, if you have a 3-5 year investment horizon, AMZN stock could prove to be a valuable addition to your portfolio. While it looks like there is more upside to AMZN stock, consider the Trefis Reinforced Value (RV) Portfolio, which has outperformed its all-cap stocks benchmark (combination of the S&P 500, S&P mid-cap, and Russell 2000 benchmark indices) to produce strong returns for investors. Why is that? The quarterly rebalanced mix of large-, mid- and small-cap RV Portfolio stocks provided a responsive way to make the most of upbeat market conditions while limiting losses when markets head south, as detailed in RV Portfolio performance metrics.

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