Amazon's (AMZN -0.34%) stock price has significantly underperformed over the last few years. The stock is up just 19% since the end of June 2020. That trails the 46% return of the S&P 500 index over the same period. 

But the tech titan has continued to grow. Amazon's trailing-12-month revenue has increased 46%, and the company has accelerated its capital spending to satisfy growing demand.

For this reason and others, Susquehanna analyst Shyam Patil sees substantial upside in the stock. The analyst has a price target of $5,000, which represents a potential 57% return from Amazon's current trading price of $3,175. Let's dig deeper to determine if this is a reasonable expectation.

A Prime delivery courier leaving a package in a garage.

Image source: Amazon.

What's to like about Amazon

Patil reiterated his positive rating in early February after Amazon reported better-than-expected earnings results for the fourth quarter of 2021.

Amazon's revenue growth of 9% was the third consecutive quarter of decelerating growth. In the year-ago quarter, Amazon reported a top-line increase of 44%. 

However, the analyst thought the company's forecast for net sales to grow between 3% and 8% year over year in the first quarter was strong considering the near-term obstacles. Patil cited several headwinds for Amazon in 2022, including labor shortages, wage inflation, supply chain issues, higher transportation costs, and slowing revenue growth from the reopening. 

Investors seem to agree with Patil. Since the beginning of February, Amazon's share price is up about 8%. But one problem with the analyst's target price is that the stock already looks fairly expensive by conventional valuation metrics. Amazon trades at a high price-to-earnings ratio of 49, which is steep for a business only growing at single-digit rates. 

So how reasonable is the $5,000 price target?

Look at where Amazon is generating the most growth

Amazon can remain a great growth stock even if revenue never reaccelerates to pre-pandemic growth levels. The key catalyst is Amazon's growth from high-margin businesses, most notably cloud services (Amazon Web Services) and advertising.

Amazon Web Services (AWS) reported a 40% year-over-year increase in revenue last quarter -- the fourth consecutive quarter of accelerating growth. This is great news for investors since AWS contributed 74% of Amazon's operating profit in 2021. 

Advertising revenue increased 32% year over year, and this segment is nearing 10% of Amazon's total revenue. The highly engaged Prime membership base of more than 200 million is proving an advantage for the e-commerce giant in advertising. 

Moreover, Amazon is demonstrating it can mitigate some of the higher costs it faces in its retail business by raising the Prime subscription fee.

Not if, but when

The consensus analyst estimate has Amazon growing its cash flow from operations to $257 per share by the end of 2024. 

Amazon has historically traded in a range of about 20 to 40 times operating cash flow per share. Applying a multiple of 25 to that $257 estimate would put Amazon's stock price at $6,425, or a post-split price of $321.

AMZN Price to CFO Per Share (TTM) Chart

AMZN Price to CFO Per Share (TTM) data by YCharts

Remember, Amazon recently announced a 20-for-1 stock split that will go into effect on June 6. So the $5,000 price target is $250 on a split-adjusted basis.

But whether Amazon's share price hits that price in 12-to-18 months, two years, five years, or longer is anyone's guess. After all, a severe market decline could bring the best growth stocks down with it. That's why investors should keep a long-term perspective and give Amazon's business performance enough time to be reflected in the stock price.