Amazon (AMZN 1.52%) stock has advanced 775% in the last decade. That means $10,000 invested in February 2016 would be worth approximately $87,500 today.
Yet, most Wall Street analysts think Amazon is undervalued. The median 12-month target price of $285 per share implies 35% upside from the current share price of $210. But investors should consider what might happen over a longer time horizon.
Can Amazon stock turn $10,000 into $50,000 in the next decade? Here's what investors should consider.
Image source: Getty Images.
Amazon is flexing its AI strength across three quickly growing markets
Amazon has a strong position in three large industries: e-commerce, digital advertising, and cloud computing. The company is also leaning on artificial intelligence (AI) across all three business segments to drive revenue growth and expand profit margins.
E-commerce
Amazon runs the largest e-commerce marketplace in North America, Western Europe, and parts of the Middle East (Saudi Arabia, UAE) as measured by gross merchandise volume. Retail e-commerce sales are likely to increase at 12% annually through 2030, according to Grand View Research.
Amazon is leaning on AI to make its retail operations more efficient. The company has built more than 1,000 generative AI tools to improve demand forecasting, seller insights, employee productivity, last-mile delivery, and customer service. It has also developed more productive robots and enhanced its robot fleet with AI to support more efficient navigation.
In the near future, Amazon plans to enhance robots with natural language processing, which will enable human employees to instruct machines conversationally. The company is also testing humanoid robots as package delivery assistants and could eventually pair those humanoid robots with robotaxis (from Amazon subsidiary Zoox).
Digital advertising
Amazon is the third-largest adtech company and the largest retail advertiser, which itself is one of the fastest-growing verticals in the broader digital advertising market. Adtech sales are likely to increase at 14% annually through 2030, according to Grand View Research.
Amazon already has a distinct advantage because it captures troves of shopper data, which lets ad buyers target campaigns. Additionally, the company has developed AI tools that let brands generate audio, images, and video. Amazon has also developed AI tools that help brands plan, create, and optimize advertising campaigns.
Cloud computing
Amazon Web Services (AWS) is the largest public cloud as measured by infrastructure and platform services spending, despite losing share to Microsoft and Alphabet in recent quarters. The cloud computing market is likely to grow 16% annually through 2033, according to Grand View Research.
AWS is monetizing artificial intelligence at every layer of the technology stack:
- Custom AI chips (alongside Nvidia GPUs) accelerate training and inference at the infrastructure layer.
- Services Bedrock and SageMaker support generative AI and machine learning workflows, respectively, at the platform layer.
- Amazon Q generates code and surfaces business insights at the application layer.
Here's the big picture: Amazon has a strong competitive position in three industries where sales growth is expected to range from 12% annually to 16% annually for several years to come. In that context, Amazon's earnings could increase double digits over the next decade, especially if investments in AI tools drive profit margin expansion.
NASDAQ: AMZN
Key Data Points
History says Amazon stock could turn $10,000 into $50,000 by early 2036, but it would be difficult
Amazon would have to increase five times in value (a 400% return) to turn $10,000 into $50,000 in the next decade. That is certainly plausible. More than 100 companies in the S&P 500 (^GSPC 1.52%) delivered returns exceeding 400% in the last decade.
Amazon currently trades at 29 times earnings, a reasonable valuation for a company whose earnings are forecast to grow at 17% annually over the next three years. However, even if Amazon keeps its current price-to-earnings ratio over the next decade (which is unlikely), earnings would have to grow at 17.5% annually for the stock price to increase fivefold.
History says Amazon could achieve 400% returns over the next 10 years, in which case $10,000 invested today would be worth $50,000 by early 2036. But the company would have to deliver very strong earnings growth over that period. Regardless, the stock looks attractive at its current price.
