The Hidden Dangers Facing Amazon.com Stock
Amazon.com (AMZN) has stumbled before. Its stock has plunged more than 30% within a span of less than 2 months on 3 occasions in recent years, wiping out billions in market value, and erasing massive gains in a single correction. If history is any guide, AMZN stock isn’t immune to sudden, sharp declines.
Specifically, we see these risks:
- AWS Growth Deceleration & Margin Collapse
- Runaway CapEx Spend Threatens Free Cash Flow
- Executive Stock Offloading Signals Peak
Risk 1: AWS Growth Deceleration & Margin Collapse
- Details: Slowing growth in key profit center, Multiple compression from tech laggard status,
- Segment Affected: Amazon Web Services (AWS)
- Potential Timeline: Immediate, worsening over next 2-3 quarters
- Evidence: AWS growth (17%) trailing Microsoft & Google, AWS profit margin contracts to 1.5-year low,
Risk 2: Runaway CapEx Spend Threatens Free Cash Flow
- Details: Negative Free Cash Flow despite record Operating Cash Flow, Sharp valuation de-rating on cash burn concerns,
- Segment Affected: Corporate-wide
- Potential Timeline: Q1-Q2 2025 reporting
- Evidence: Capital expenditures nearly doubled to $88.0 billion TTM in Q1 2025, Significant decline in free cash flow despite profit growth,
Risk 3: Executive Stock Offloading Signals Peak
- Details: Erosion of investor confidence, Stock overhang from continuous insider selling,
- Segment Affected: Overall Company Outlook
- Potential Timeline: Ongoing
- Evidence: Persistent selling by CEO, CEO of Worldwide Stores, and other SVPs in late 2025, No insider open market buys reported in the last 30 days,
What Is The Worst That Could Happen?
Looking at Amazon’s risk during major market sell-offs gives a clearer picture. It plunged 94% in the Dot-Com crash, 65% in the Financial Crisis, and 56% during the inflation shock. Even the less severe dips, like 34% in 2018 and 23% in the Covid slump, show notable drawdowns.
But the Stocks fall even when markets are good – think events like earnings, business updates, and outlook changes. Read AMZN Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.
Is Risk Showing Up In Financials Yet?
- Revenue Growth: 10.9% LTM and 11.3% last 3-year average.
- Cash Generation: Nearly 2.0% free cash flow margin and 11.4% operating margin LTM.
- Valuation: Amazon.com stock trades at a P/E multiple of 35.0
| AMZN | S&P Median | |
|---|---|---|
| Sector | Consumer Discretionary | – |
| Industry | Broadline Retail | – |
| PE Ratio | 35.0 | 23.5 |
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| LTM* Revenue Growth | 10.9% | 6.1% |
| 3Y Average Annual Revenue Growth | 11.3% | 5.4% |
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| LTM* Operating Margin | 11.4% | 18.8% |
| 3Y Average Operating Margin | 7.9% | 18.3% |
| LTM* Free Cash Flow Margin | 2.0% | 13.4% |
*LTM: Last Twelve Months
If you want more details, read Buy or Sell AMZN Stock.
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