What’s Behind The 175% Rise In Amazon’s Stock?
In early 2023, Amazon’s stock (NASDAQ: AMZN) was trading at a modest $84. Today, it has soared to $232—a stunning 176% jump that significantly outpaces the broader NASDAQ index’s 2x rise. So, what’s powering this outsized move?
The answer lies in three critical factors:
- The Price-to-Sales (P/S) Ratio: The P/S ratio has skyrocketed by 124%, rising from 1.7 in 2022 to a hefty 3.7 today. This shows investors are paying more for every dollar of Amazon’s sales, reflecting a sharp shift in confidence and future expectations.
- Revenue Growth: Amazon has added a massive $156 billion to its top line, marking a 30% increase in revenue from $514 billion to $670 billion. This isn’t merely growth; it’s a major scale-up of the business.
- Share Dilution: Shares outstanding are up 6% to 10.8 billion, which has mildly offset gains. Even so, the first two forces have easily outweighed this impact.
But the question remains: Can this powerhouse performance continue? We’ll unpack what’s driving the momentum and what could be next for Amazon. But if you seek an upside with less volatility than holding an individual stock, consider the High Quality Portfolio. It has comfortably outperformed its benchmark—a combination of the S&P 500, Russell, and S&P MidCap indexes—and has achieved returns exceeding 91% since its inception. Separately, see – CoreWeave Stock To $200?
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What’s Fueling This Revenue Growth?
Beyond its sheer size, Amazon’s revenue growth is being propelled by a shift in mix—a stronger, more profitable business model. E-commerce remains huge, but it’s no longer the only engine. Three areas now anchor the surge.
The Power of the Cloud: AWS
The prime driver is Amazon Web Services (AWS). This cloud unit has outpaced retail by a wide margin. While North American and international sales grew by 23% and 21% respectively between 2022 and 2024, AWS revenue surged by 34% over the same stretch. Its high-margin, scalable services across enterprises, governments, and consumers make AWS the company’s most important growth engine.
The Rise of Advertising
Amazon’s rapidly expanding digital advertising business is another key contributor. Like Google and Meta, the company leverages vast shopper data and platform reach to sell sponsored listings and display ads. This high-margin stream diversifies profits beyond e-commerce and cloud.
The Subscription Empire
Subscriptions—especially Prime—form the third pillar. Prime now bundles shipping, streaming video and music, exclusive deals, and more, cultivating a loyal base that spends more than non-Prime customers. This recurring revenue adds stability and deepens Amazon’s moat.
The AI Arms Race
Competition in AI is intensifying. AWS’s leadership faces aggressive investments from Microsoft (Azure) and Google (Cloud). With Microsoft’s OpenAI tie-up and Google’s expanding AI stack, Amazon is matching pace, committing tens of billions to AI-related capex—a strategic swing that will shape whether today’s momentum endures.
What’s Driving The Valuation Higher?
Amazon’s remarkable valuation rerating stems from a financial makeover: a once low-margin retailer has become a profit generator, resetting investor perception.
The Profit Engine: AWS and Operating Margins
AWS is the catalyst. Since 2022, Amazon’s operating margin has jumped 377%, climbing from 2.4% to 11.4%. This profitability expansion—driven by AWS—explains why investors now assign a premium multiple. It signals durable, higher-quality earnings.
The Valuation Multiple Effect
Pair stronger margins with solid growth and AWS scale, and the result is multiple expansion. The company’s price-to-sales valuation multiple has ballooned by 124%, moving from 1.7x in 2022 to 3.7x today—an expression of renewed confidence in long-term profit potential.
But What Next? Is AMZN Stock A Buy At $230?
At its current price of around $230, Amazon’s stock trades at a P/S of 3.7x, close to its five-year average of 3.2x. There are, however, credible reasons the multiple could expand.
AI isn’t just a buzzword here—it’s a strategic lever set to amplify growth and reshape the P&L across the company.
A New Chapter of Growth
Within AWS, AI demand is accelerating as businesses build and deploy their own models and apps—directly boosting cloud consumption. For a deeper breakdown of how this can influence the stock, see Amazon Stock: Path to 2x Growth.
Retail is also being rewired by AI: better recommendations, faster search, and more personalized storefronts. These upgrades can lift conversion, raise order values, and sharpen ad performance—expanding a lucrative, high-margin revenue stream.
The Road Ahead
Put together, the outlook is compelling. Amazon targets low double-digit sales growth over the next three years, with earnings expected to rise even faster. With expanding profitability, continued AWS leadership, and dominance in e-commerce, the case for a higher valuation stays intact.
But Wait Don’t Forget To Account For Risks
Even standout winners carry risk. Amazon’s past drawdowns have been deeper than the market’s—underscoring both volatility and resilience.
A History of Market Shock
In the 2022 inflation-driven sell-off, Amazon fell 52% versus the S&P 500’s 25% slide, taking over a year to reclaim its prior high (February 2024). During trade-war flare-ups, the pattern echoed—Amazon dropped 30% while the S&P 500’s peak-to-trough decline was 19%. This history shows that when markets turn, Amazon can fall harder and faster than peers.
The High-Stakes Bet
Company-specific risks loom, too. Since 2022, Amazon has poured $257 billion into capex—a bold wager whose payoff must meet investor expectations. At the same time, AWS faces stiff competition from Microsoft Azure and Google Cloud. Any slowdown in AWS, paired with questions about capex returns, could pressure the stock.
For a fuller downside view, see our scenario analysis: How Amazon Stock Falls By 50%?
See, there always remains a meaningful risk when investing in a single, or just a handful, of stocks. Consider Trefis High Quality (HQ) Portfolio which, with a collection of 30 stocks, has a track record of comfortably outperforming the S&P 500 over the last 4-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics.
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