Oh, how the mighty have fallen. Since briefly achieving a market cap of more than $1 trillion, Amazon.com (NASDAQ:AMZN) stock has fallen on hard times, losing nearly 25% of its value since topping out in early September. What caused the decline? The recent market correction didn't help matters any, but a rare revenue miss and softer-than-expected guidance in conjunction with the company's most recent quarterly financial report convinced some investors the sky was falling.

Not everyone is panicking, though, and a growing chorus of Wall Street analysts are saying the sell-off is overdone. One went so far as to say that Amazon is his "best idea for 2019." Let's look at the justification for these bullish calls to see if investors should follow suit.

A man sitting with his fingers interlaced behind his head watching a bank of monitors showing graph lines

Image source: Getty Images.

Watch the margins

Piper Jaffray analyst Michael Olson thinks investors aren't focusing on the big picture. He believes that Amazon is set for "material appreciation" in the coming 12 to 24 months, with a price target of $2,050 -- 24% higher than the current price. Olson cited margin expansion, as well as strength in Amazon Web Services (AWS) and advertising as drivers for future results.  

A look at recent results reveals plenty of evidence to back up Olson's take. Amazon's margins have shown significant improvement in recent quarters. Most recently, North American operating margins improved 13-fold, growing to 5.9%, up from just 0.4% in the prior-year quarter. The international segment isn't profitable yet, but operating loss margins improved to negative 2.5% from negative 6.8% in the year-ago quarter. Most impressive was AWS, which boosted operating margins to 31% of sales, up from 25%. 

Amazon's advertising has been producing blockbuster results as the company leverages its digital real estate. The segment has produced triple-digit gains in each of the previous three quarters, with year-over-year growth of 132%, 129%, and 123%, respectively. The business is currently on track to top $10 billion in annual sales.

Business and Prime opportunities

Cowen analyst John Blackledge is even more bullish on Amazon, saying it's the firms "best idea for 2019." He has a price target of $2,250, about 31% higher than the current price. He cites a number of drivers, including the company's quickly growing business-to-business (B2B) success, advertising, and Amazon's Prime customer loyalty program. "We view Amazon Prime as the long-term driver of Amazon's retail business."  

B2B emerged earlier this year, after the company revealed that its Amazon Business platform had grown to more than $10 billion in annualized sales -- in less than four years. Amazon said it serves millions of businesses worldwide, including 55 of the Fortune 100 companies, 80% of the 100 largest-enrollment education organizations, more than half the 100 biggest hospital systems, and more than 40% of the 100 most-populous communities' local governments. The platform is now available in seven international markets.

Couple lying on floor at home shopping online with credit card

Image source: Getty Images.

Prime shouldn't be discounted as a significant driver to Amazon's business. It's anticipated that Amazon will account for nearly half of all e-commerce in the U.S. in 2018, and Prime subscribers are among the company's best customers, spending $1,400 annually, more than twice the amount of the average customer, according to research by Consumer Intelligence research Partners. While it's estimated that 61% of U.S. customers are Prime members, the program's international growth is just getting started.

E-commerce expansion

JMP Securities analyst Ronald Josey sees the trend toward online shopping and Amazon's dominant position as drivers for future growth. He expects Amazon stock to top $2,050 over the next 12 months, amounting to 24% gains. Josey says Amazon is "the leader in selection, convenience, and price across products and categories." A recent survey of 250 found that holiday e-commerce shopping increased 20% year over year between Nov. 1 and Nov. 26 (Cyber Monday), and acceleration from the 17% year-over-year gains in the prior year. Josey also noted that Amazon was the first stop for shoppers, with 73% beginning their searches on the company's digital domain.

Earlier this year, eMarketer forecast that Amazon would drive 80% of U.S. e-commerce growth in 2018 and capture 49% of all digital purchases in the country. The company's market share is expected to accelerate, growing to nearly 54% of all U.S. online sales in 2019. 

E-commerce sales have been steadily rising over the past decade, to more than 9% recently, up from less than 4% 10 years ago. Digital sales are expected to account for 10% of U.S. retail this year, climbing to 13% by 2022, according to eMarketer. With the dominant position in the industry, it isn't surprising that Amazon would garner a growing portion of those purchases. 

Final thoughts

Each of these analysts highlighted some very real opportunities for Amazon over the coming year. These include increases in e-commerce and cloud computing, margin expansion, and continued growth in emerging businesses like advertising and B2B. Each of these could be a potential catalyst that could drive Amazon to new heights in the months and years to come.

An even more intriguing and likely possibility is that they all contribute to Amazon's -- and investors' -- future gains.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Danny Vena owns shares of Amazon. The Motley Fool owns shares of and recommends Amazon. The Motley Fool has a disclosure policy.