We all strive to buy stocks when they trade at a discount. Yet, when the time comes, it's easier said than done. After all, things look bleak when a stock is at its lows, and we wonder if it could go lower still. It's only natural. So let me emphasize that I am not calling a bottom in Amazon's (AMZN 2.08%) stock. That's market timing, and studies conclusively show that market timing doesn't work.

Still, nothing says we can't be opportunistic. Amazon stock has been routed this year and is down more than 50% from its 2021 high. The massive drop compels closer examination.

So, why Amazon, and why now?

1. Amazon stock's largest drawdown since the Great Recession

This year has been the perfect storm for Amazon in many ways. A tight labor market and logistical headaches have added billions in costs to the bottom line. Inflation crimps margins and threatens to slow consumer spending -- especially during the all-important holiday season. The strong dollar has hurt international results, and corporations are looking to reduce costs affecting Amazon Web Services (AWS) sales and profits. As a result, Amazon stock is now in its most significant fall from highs since the Great Recession, as depicted below.

AMZN Chart.

AMZN data by YCharts.

This pullback could be just what long-term investors need to outperform the market once the storm blows through. Although the challenges are significant, they don't threaten the company's long-term viability. There are several reasons for optimism. Let's take a look.

2. Amazon's e-commerce market share

The global retail e-commerce market has exploded from just $1.3 trillion in 2014 to an estimated $5.5 trillion in 2022. It's expected to grow at a compound annual growth rate of 10% through 2025, reaching $7.4 trillion. Even at these astounding numbers, e-commerce will account for less than 25% of retail sales, giving it room to grow for many more years.

Amazon has been a massive catalyst for the online sales explosion. The company has a stranglehold on the U.S. online retail market with a 40% share. To put this in perspective, Walmart is second in market share at just 7%. 

Amazon's sales leaped in 2020 and 2021 due to COVID-19's effect on people's shopping habits, and they are still growing, as shown below.

Amazon's total sales TTMs as of Q3 2022.

Source: Amazon Q3 Investor Presentation.

Despite significant headwinds, total sales are up 10% over the prior 12 months. We could see considerable outperformance when some economic challenges lessen.

3. Digital advertising is a force

Amazon's digital advertising service revenue was just a blip on the radar as recently as 2019, when it pulled in $12.6 billion and had a 7.8% share of the U.S. market, according to eMarketer. By 2021 this had grown to $31.2 billion in sales approaching 15% of the market share.

In 2022 it is the country's fastest-growing platform, and revenue has increased 22% through the third quarter, even with advertisers tightening budgets. This is in stark contrast to its fiercest competitors like Alphabet and Meta. Alphabet's Google Advertising sales are growing slower than Amazon's digital ad sales, while Meta's (formerly Facebook) growth has hit a brick wall.  

Online advertising is another economic growth area where Amazon is well positioned to make hay.

4. Prime keeps getting better

If you are an adult in the U.S. reading this article, you are probably an Amazon Prime member. That's because 153 million -- more than half of all American adults -- are members, according to Statista. Memberships have climbed to 200 million globally. That is a mind-boggling number. It illustrates competitors' uphill battle to unseat Amazon from the e-commerce throne. 

Not content to rest on its laurels, Amazon Prime partnered with the NFL to broadcast Thursday Night Football starting in September. The first night drew 15 million viewers and drove record Prime signups during the game.

Amazon Prime is a vital part of Amazon's recent success, and the memberships help keep customers within its wider ecosystem of products and services.

5. AWS should hold things together

Last but definitely not least is Amazon's cloud infrastructure segment, AWS. This segment owns more than 33% of the global market and is an essential tool for countless cloud-based applications. Revenue has skyrocketed from $35 billion in 2019 to a run-rate of $82 billion as of Q3.

AWS sales growth slowed in Q3 to 27% year over year after running well over 30% previously. Companies are looking to cut costs with a recession looming, so Amazon is working with them to meet their needs affordably. Still, 27% growth during a tough economy is nothing to sneeze at.

The best thing about AWS is its profitability. It produced $17.6 billion in operating income on a 30% operating margin so far in 2022. AWS is singlehandedly providing Amazon's operating profits as other segments struggle. Amazon is in an enviable position to keep profiting from rising worldwide cloud services demand

There is no doubt that Amazon is struggling now. The economy is faltering, and the company's results reflect it. However, successful long-term investors look beyond the current headlines to outperform the market. With the stock down 50% from its highs, the reasons above hint at a massive comeback for patient investors.

It's challenging to invest in a bear market. No one knows just how low it will go before recovering. But remember this important line of investing wisdom: "Pessimists sound smart. Optimists make money."