Is Amazon Stock A Buy Heading Into 2025?
Tuesday, Dec 31, 2024 9:38 am ET
5min read As we approach the end of 2024, investors are looking ahead to the next year and wondering which stocks to buy. One name that keeps popping up is Amazon (NASDAQ: AMZN). With a strong 2024 performance and analysts predicting it as their top 2025 pick, Amazon stock is certainly worth considering. But is it a buy heading into 2025? Let's dive into the data and find out.
Amazon stock had a strong 2024, but it still has room to run, according to analysts. The company's e-commerce, advertising, and AWS segments have all been performing well, driving growth and profitability. In the third quarter of 2024, Amazon's revenue grew by 11% year over year, with net income rising to $30.42 billion. Looking ahead, analysts expect Amazon's revenue to grow at a 4.5x rate over the next five years.
One of the reasons Amazon is expected to continue performing well is its strong market share in the e-commerce industry. In 2023, Amazon accounted for 38% of the U.S. e-commerce market, up from 37% in 2022. This growth indicates that Amazon is maintaining its competitive edge despite the presence of other tech giants and traditional retailers. Amazon's Prime membership program, which has over 200 million paid members worldwide, is a significant driver of e-commerce growth and provides the company with a large and loyal customer base.
Another factor contributing to Amazon's strong performance is its continued investment in AWS. In the third quarter of 2024, AWS represented 62% of Amazon's operating income, despite accounting for only 17% of total sales. This high margin is expected to continue, contributing significantly to Amazon's overall profitability in 2025. AWS' reacceleration in growth, with revenue increasing 19% year over year, is also expected to drive growth and profitability for the company.
Amazon's advertising business is also expected to play a significant role in the company's overall revenue growth in 2025. In the third quarter of 2024, Amazon's advertising revenue grew by 28% year over year, reaching $9.5 billion. This growth is expected to continue, driven by the increasing number of third-party sellers and brands using Amazon's platform to reach customers. While Amazon faces competition from other tech giants like Google and Facebook, its unique position as a retailer with a vast customer base and extensive data on consumer behavior gives it a competitive advantage in targeted advertising.
In conclusion, Amazon stock is a strong buy heading into 2025. The company's e-commerce market share, continued investment in AWS, and growing advertising business all contribute to its expected growth and profitability. With analysts predicting a 4.5x revenue growth rate over the next five years, Amazon stock is an attractive option for investors looking to capitalize on the company's strong performance.
Disclaimer: the above is a summary showing certain market information. AInvest is not responsible for any data errors, omissions or other information that may be displayed incorrectly as the data is derived from a third party source. Communications displaying market prices, data and other information available in this post are meant for informational purposes only and are not intended as an offer or solicitation for the purchase or sale of any security. Please do your own research when investing. All investments involve risk and the past performance of a security, or financial product does not guarantee future results or returns. Keep in mind that while diversification may help spread risk, it does not assure a profit, or protect against loss in a down market.
