for·ev·er -- for all future time, for eternity, in perpetuity. -- Oxford English Dictionary
First, let's address the elephant in the room: Forever? To be totally honest here, I'd be hard-pressed to name any stock that I would simply buy and hold forever without another look. Investing is complicated, and too many things can happen that can derail an investing thesis.
However, as Warren Buffett stated in the 1988 Berkshire Hathaway shareholder letter, "In fact, when we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever."
Some investors took this to mean that Buffett would "never" sell stocks, but his actions say different. The legendary investor has since provided context for this famous quote, suggesting that he will sell stocks given the right circumstances. "We would sell if we needed money for something else," and when "we don't think their competitive advantage is as strong as we thought it was when we initially made the decision."
With that as a backdrop, there are some companies that have so many ways to win that planning to hold them forever seems much more reasonable. That's why I plan to hold Amazon (AMZN 0.97%) stock indefinitely.
Image source: Getty Images.
Digital retail is just the beginning
Amazon's biggest claim to fame is the company's undeniable success in digital retail. From humble beginnings as an online bookseller, Amazon has become the world's largest e-commerce platform, earning the moniker "The Everything Store."
The magnitude of sales is so great that the law of large numbers has kicked in, and Amazon's year-over-year growth has slowed to single digits. Yet the results are impressive nonetheless. In the first quarter, e-commerce sales of $126 billion grew 6% year over year. Put another way, Amazon added nearly $7 billion in additional retail sales compared to the prior-year quarter.
That's impressive, particularly given the size of Amazon's existing sales base.
On a cloudy day
While the company continues to expand its digital retail empire, its other businesses have taken up the flag of double-digit growth. Amazon Web Services (AWS), the company's cloud computing arm, generated revenue of more than $29 billion, jumping 17%. The advent of generative AI has reignited Amazon's cloud growth, as businesses of all sizes scramble to adopt AI to improve efficiency, enhance the decision-making process, and personalize services.
Amazon is positioning AWS as the go-to for AI. The company offers a growing suite of large language models (LLMs) to its cloud customers, which includes a family of its own AI models. In a blog post last month, CEO Andy Jassy said the company had "over 1,000 generative AI services and applications in progress or built ... that's a small fraction of what we will ultimately build." Amazon has also invested roughly $8 billion in AI start-up Anthropic, whose Claude models compete directly with OpenAI's ChatGPT and Alphabet's Gemini.
By positioning itself as an everything store for AI, Amazon is betting it will earn a greater share of the AI pie -- and fueling AWS growth along the way. The cloud segment supplies the bulk of Amazon's riches, responsible for 19% of the company's revenue and 63% of its operating income, so this strategy is brilliant.
This is the fastest-growing business
As important as AWS is to Amazon's overall success, it has ceded the title as the company's fastest-growing business. That distinction belongs to digital advertising, which grew 18% year over year in the first quarter. Amazon has ascended the ranks to become the world's third-largest digital advertiser, behind Alphabet and Meta Platforms.
While its ad business first started as a way for Amazon to capitalize on the valuable digital real estate on its e-commerce platform, it has quickly come into its own. Prime Video now comes standard with ads, unless customers choose to fork over an additional $3 monthly to remove them. The platform's NFL games and other live sports have been a boon to its advertising ambitions.
Advertising services generated $58 billion over the preceding four quarters. That said, the global advertising market is expected to surpass $1 trillion in 2025, which helps illustrate the magnitude of the opportunity that remains.
Not one top-tier business, but three
You'd be hard-pressed to find another company with this many industry-leading businesses. Amazon is the global leader in digital retail and the world's second-largest retailer overall. AWS is the global cloud infrastructure leader, with a dominant 32% of the market, according to market analyst Canalys. And, as previously stated, it's the world's third-largest digital advertiser, and closing the gap with its two larger rivals.
Add in the wild card of AI -- which the company uses to improve the efficiency and profitability of its major business segments -- and you have all the ingredients for a "forever" stock.
Despite all that, Amazon stock is currently selling for just 31 times next year's expected earnings. Given the company's successful track record and the long runway for growth ahead, I would argue that's an attractive price to pay for a company with so many ways to win.
