Amazon stock (NASDAQ: AMZN) has declined by around 10% so far this year, as investors grow increasingly concerned about the possibility of escalating trade disputes. President Trump has floated a 25% tariff on auto imports and indicated that more tariffs could be levied on European and Canadian products if he believes they harm the U.S. economy.[]
Still, AMZN stock is up 145% when measured from early 2023, thanks largely to three key drivers:
- a 104% increase in its P/S ratio, which now stands at 3.4, compared to 1.7 in 2022;
- a 24% jump in revenue, rising from $514 billion to $638 billion; partially offset by:
- a 3% increase in total shares outstanding to 10.6 billion.
We’ll take a closer look at these dynamics. For more details, check out our dashboard on Why Amazon Stock Moved. While AMZN has seen a strong run-up, if you’re looking for upside potential with less volatility than a single stock, consider the High-Quality portfolio, which has beaten the S&P with returns exceeding 91% since inception.
With 24% Annual Growth Rate, AWS Is Driving Amazon’s Expansion
Amazon’s solid revenue growth is fueled by long-term trends in e-commerce, streaming, and digital advertising. As the leading player in U.S. online retail with a 38% market share, Amazon benefits from multiple revenue streams, especially through its innovative advertising model, which generates income from both ad placements and resulting sales.
A key to this growth has been Amazon’s diversification strategy, with Amazon Web Services (AWS) playing a major role. From 2020 to 2024, AWS grew at an average annual rate of 24.4%, far exceeding the growth of its North America (13.2%) and International (8.7%) operations. This underscores the impact of Amazon’s long-term investments in infrastructure, including data centers, e-commerce tools, and logistics networks.
Looking forward, while AWS remains a crucial growth engine, Amazon faces rising competition in cloud computing. Rivals like Microsoft Azure and Google Cloud are gaining ground. Microsoft’s partnership with OpenAI and its aggressive AI investments could give it an edge, while Google continues to expand its generative AI offerings. These developments highlight the need for Amazon to continue innovating to maintain its leadership in the tech sector.
After years of scaling operations, Amazon is now beginning to realize the payoff of its strategic investments. Its adaptability and focus across high-growth industries continue to reinforce its position in the digital economy.
What’s Behind The 2x Rise In Valuation Multiple?
AWS has played a pivotal role in Amazon’s financial evolution, helping to significantly boost profitability. From 2022 to 2024, Amazon’s operating margin surged from 2.4% to 10.8% — a five-fold increase. This improved profitability, paired with strong revenue growth and AWS’s rapid expansion, has shifted investor sentiment in Amazon’s favor.
During this period, Amazon’s price-to-sales multiple nearly doubled from 1.7x to 3.4x, signaling renewed confidence in its growth outlook. This rebound came amid broader market turmoil, especially the inflation-driven market sell-off in 2022.
At the time, Amazon stock dropped sharply — down 52% from a January 2022 peak of $170.40 to $81.82 by December. That decline outpaced the S&P 500’s 25.4% fall. It wasn’t until February 2024 that AMZN recovered to its prior high, demonstrating both the stock’s volatility and resilience.
But What Next? Is AMZN Stock A Buy At $200?
Now trading at $200, Amazon’s stock carries a P/S ratio of 3.4x, roughly in line with its five-year average of 3.2x. Still, there are solid reasons to believe the multiple could rise further.
Amazon’s aggressive investments in artificial intelligence offer significant upside across several business segments. Within AWS, a surge in AI-driven app development is expected to drive increased demand for cloud infrastructure. On the retail side, AI-powered enhancements in product recommendations, search, and personalization could meaningfully lift performance.
These improvements are likely to boost conversion rates, increase average order values, and improve advertising efficiency both on Amazon’s platform and beyond. Sales are expected to grow at a low double-digit pace in the coming years, with profits projected to grow even faster.
With rising profitability, ongoing AWS momentum, and sustained dominance in e-commerce, Amazon may see further expansion in its valuation multiple. Investors could view these strategies as strong catalysts for future gains. We estimate Amazon’s valuation at $244 per share — about 20% above current levels — based on a P/S multiple of 4.1x, 20% higher than the current 3.4x.
Notably, the increase in AMZN stock over the last 4-year period has been far from consistent, with annual returns being considerably more volatile than the S&P 500. In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, is considerably less volatile. And it has comfortably outperformed the S&P 500 over the last four-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.
While AMZN may still have room to climb, it’s worth exploring how Amazon’s Peers stack up on key financial metrics. You can find more comparisons across industries on Peer Comparisons.
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