In 2022, Amazon's (AMZN -0.29%) stock fell nearly 50% over 12 months as an economically challenging environment wreaked havoc on its e-commerce business. Reductions in consumer spending and foreign currency fluctuations led its North American and international segments to report a combined $10.6 billion in operating losses in fiscal 2022.

As a result, Amazon's stock garnered a lot of bears who are justifiably concerned about how long it will take for the company to get its e-commerce segments back to profitability. However, bulls continue to see Amazon's long-term potential as the leader of two lucrative markets.

Prospective investors would do well to be aware of both arguments. Here's the bear versus bull of Amazon's stock. 

Bear: A risky buy compared to the competition

Amazon's e-commerce segments accounted for 84% of the company's revenue in 2022, while its cloud computing platform, Amazon Web Services (AWS), comprised the rest. Consequently, the declines in e-commerce last year put the company at a disadvantage.

The good news is that AWS kept the company profitable in 2022, with its $22.8 billion pulling Amazon out of the red and giving the company a total $12.2 billion in profits. However, Amazon's weaknesses have also made its stock a hard sell compared to many of its competitors. The table below shows that the company's recent headwinds led it to report the lowest free cash flow as of Dec. 30, 2022, among the five most prominent names in tech. 

Chart showing Amazon's free cash flow lower than that of Apple, Alphabet, Microsoft, and Meta Platforms in 2022.

Data by YCharts

Moreover, Amazon's stock has risen 13% year to date, yet remains down 35% year over year. But despite the price being significantly down, the stock is still expensive compared to its peers, as illustrated in the chart below. 

Chart showing Amazon's PE ratio much higher than those of Microsoft, Apple, Alphabet, and Meta Platforms in 2023.

Data by YCharts

Amazon has the highest forward price-to-earnings ratio among the likes of Microsoft, Apple, Meta, and Alphabet, suggesting the e-commerce giant's stock offers less value than its peers. As a result, Amazon's stock feels like a risk compared to other options in the tech market. 

Bull: A lucrative long-term future

Amazon and its investors have been on a roller coaster in recent years, with the COVID-19 pandemic sending its stock soaring as lockdowns had people flock to its e-commerce site in 2020 and 2021. Then, last year's economic downturn led to reduced sales and quarterly results, which were unfairly compared to the atypical boom of the previous year. 

Despite recent headwinds, Amazon remains a leader in two high-growth markets: e-commerce and cloud computing. According to Grand View Research, the e-commerce market was valued at $9.09 trillion in 2019 and is projected to expand at a compound annual growth rate (CAGR) of 14.7% through 2027. Meanwhile, Amazon has the largest market share in the industry at 37.8% in the U.S., with Walmart in second place at 6.3%. 

The e-commerce market was hit hard by macroeconomic headwinds in 2022, but it still has a long future ahead, with Amazon set to profit the most from the industry's growth. 

Moreover, Amazon Web Services' leading 34% market share in cloud computing is a lucrative long-term asset for the company. The cloud market was worth $483.98 billion in 2022 and is expected to grow at a CAGR of 14.1% through 2030. With technology like artificial intelligence continuing to enhance and develop cloud computing platforms, the market likely has much growth ahead, with AWS profiting significantly from its dominating position for years. 

Amazon's potential means its average 12-month price target of $137.86 is 45.6% higher than its current price. The company's troubled year may have put it in a questionable position and dragged down the value of its stock, but its long-term potential outweighs temporary headwinds. Amazon likely has a fruitful future, making its stock a compelling long-term investment.