E-commerce giant Amazon (AMZN 0.07%) has certainly turned several patient investors into millionaires since its public offering in 1997.
But it would be naïve to pretend that the stock's 230,000% gain since then wasn't rooted in extraordinary circumstances. That's the proliferation of the internet, of course, paired with founder Jeff Bezos' vision of how the internet would become a powerful shopping medium. That revolution obviously won't be repeated, so neither will Amazon stock's stunning performance during that time.
Still, there's no denying that Amazon remains a powerhouse. Could a new investment in it today set you up for life?
Amazon, up close and personal
Amazon is largely credited with the creation of the e-commerce business, and has since become the leader of at least North America's sliver of the market. As of its most recent look, market research outfit Digital Commerce 360 says Amazon controls about 40% of the United States' online shopping market, while e-commerce directly or indirectly makes up 83% of Amazon's 2024 top line of $638 billion.
The other 17% of the company's revenue comes from cloud computing. Amazon Web Services (or AWS) generated $107.5 billion worth of revenue last year, up 18% year over year, and extending a long streak of similar growth. However, AWS contributed $38.8 billion worth of operating income in 2024, or a disproportionately greater 58% of the company's operating profit.
NASDAQ: AMZN
Key Data Points
Amazon's bigger-but-less-profitable e-commerce business is also changing in a way that may ultimately widen its net profit margin rates. Namely, the online shopping mall is increasingly an advertising platform, generating $58 billion worth of ad revenue in 2024, up 23% from 2023's tally of $47 billion.
The company also did $44 billion worth of subscription business last year, mostly via Amazon Prime, whose members tend to spend more money with the company.
The question remains, however -- could buying Amazon stock today set you up for life?
Multiple tailwinds blowing
If you're looking for a repeat of the stock's performance during the first 28 years of its existence, forget about it. It's not going to happen. That was a once-in-a-generation stroke of luck that few people saw coming the way it did.
Nevertheless, an above-average yearly return could still prove life-changing to patient investors.
There's certainly reason for such optimistic hope. Take the sheer current size of Amazon's e-commerce business as an example, and the scope of e-commerce in general. The U.S. Census Bureau reports that online shopping only accounts for about 16% of the nation's total retail spending.
To this end, Straits Research suggests that North America's business-to-consumer e-commerce industry could grow at an annualized pace of 9.3% between now and 2032. Amazon's arguably better positioned than any other player to win a significant share of the 60% of the ever-growing North American e-commerce market that it doesn't already control.
The company's not doing too shabbily overseas, either. Although its international e-commerce operation had been unprofitable for most of its existence, this arm appears to have turned a profit corner in 2023, and stayed there.
Data source: Amazon Inc. Chart by author. Numbers are in billions.
Industry research outfit eMarketer predicts that the global business-to-consumer online shopping business will grow on the order of 8% per year through 2027, but there will still be plenty more room to continue growing after that. eMarketer says that even with that growth, e-commerce will still only account for 23% of the planet's retail spending at the end of that timeframe.
Then there's Amazon's nascent advertising endeavor. The so-called retail media advertising market allowing brands to promote their products through the third-party platforms selling them is set to grow at an average annualized pace of 17% through 2028, again according to eMarketer.
As for cloud computing, the industry that AWS already leads has a long growth runway ahead as well. Mordor Intelligence expects the global cloud computing industry to expand by more than 16% per year through 2030, which once again is only a likely hint of what awaits past that point.
Growth potential that's built to last
Amazon's highest-growth era may be in the rearview mirror, and the stock itself may be down to the tune of 30% just since February on worries over the effect of newly enacted tariffs. But this company's top profit center -- cloud computing -- is largely immune to economic headwinds, simply because the world's become incredibly dependent on the cloud's solutions.
Meanwhile, although economic headwinds may soon be blowing, they could actually blow in Amazon's favor. Barring the unlikely outright upheaval of all retail spending, newly cost-conscious consumers may actually gravitate toward Amazon's frequently lower-priced assortment of goods. Either way, any such slowdown will only be a temporary one.
This might help. Although individual investors have clearly grown worried about Amazon's foreseeable future over the course of just the past few weeks, analysts haven't. The analyst community currently rates Amazon stock as a strong buy, with a consensus price target of $266.70 that's 50% above the ticker's recent price. That's not a bad way to start out a new long-term trade that, yes, could set you up for life.
You'll just need to be patient enough to let it.
