Amazon (AMZN +1.10%) stock has more than doubled since the beginning of 2023. So far in the 21st century, it has doubled five times plus additional big gains.
Generating 100% returns isn't as easy with a market cap of nearly $1.9 trillion. It's not impossible, though. Here's exactly how Amazon's stock could double again by 2030.
NASDAQ: AMZN
Key Data Points
1. Get some macroeconomic help
Amazon can't double on its own. It needs some macroeconomic help. In particular, the chances that Amazon stock will double over the next six and a half years improve significantly if the U.S. avoids a prolonged economic recession.
During the Great Recession, Amazon's stock plunged as much as 65%. A repeat of such a steep decline would definitely make it harder for shares of the e-commerce and cloud services giant to soar 100% or more by 2030.
The ideal environment for Amazon would be low inflation, low unemployment, and robust economic growth in the U.S. and other major markets where the company operates. The stronger the global economy is, the greater the probability Amazon's stock will double.
2. Benefit from a massive AI tailwind
A booming economy alone likely won't be enough to drive Amazon's share price 100% higher. I think Amazon must also benefit from a massive artificial intelligence (AI) tailwind.
Amazon CEO Andy Jassy has said in the past that less than 10% of global IT spending is currently in the cloud but could grow to over 90% within the next 10 to 15 years. AI could help make Jassy's prediction come true -- and perhaps in a shorter period than he envisions.
Amazon Web Services (AWS) is the leading cloud services provider. It would almost certainly enjoy significant growth if AI sparks a surge in migration to the cloud. Of course, AWS has strong competition. However, Amazon is investing heavily in AI and appears to have a good overall AI strategy.
The company could also continue to reap the rewards from its AI investments through improved efficiency in its e-commerce business. Higher margins translate to higher profits. If Amazon's earnings grow rapidly, its share price will follow suit.
3. Conquer new markets
Perhaps the biggest mistake made by many investors about Amazon in its early days was seeing the company as only an online bookseller. Amazon had much greater ambitions. Books were just a start that helped it catapult into additional markets.
The odds that Amazon's stock double by 2030 improve tremendously if the company can conquer new markets. Amazon's recent initiatives highlight some areas where it could be successful in the coming years. For example, the company has expanded into healthcare with Amazon Pharmacy and the acquisition of primary care provider One Medical.
Advertising presents an obvious big opportunity for Amazon. In the fourth quarter of 2023, advertising was the company's fastest-growing business by far. I expect this momentum to accelerate with Amazon running ads on its Prime Video streaming service.
Even though Amazon's deal to acquire iRobot fell apart, home robotics looks like a great fit for the company's expansion strategy. I could see Amazon moving more into the fintech space as well.
Can Amazon really double by 2030?
Even if Amazon enjoys favorable macroeconomic trends, receives a boost from AI, and successfully expands into new markets, can its shares really double by 2030? I think it's quite possible.
A 100% return by the end of 2030 translates to a compound annual growth rate of around 11.3%. Amazon's earnings increased by 14% year over year in the fourth quarter of 2023. If the company can keep up this growth rate, its stock has a good shot of doubling or more by 2030.
I wouldn't bet the farm on Amazon delivering a 2x gain over the next six and a half years. However, I wouldn't bet against the stock achieving the feat either.
