Amazon's allure grows with cheaper shares than Apple, Walmart
Mar 26, 2025 - financialpost.com
Amazon's shares are becoming increasingly attractive to investors due to a recent drop in share price and expectations for long-term earnings growth. The stock is trading at about 27 times its estimated future earnings, which is significantly lower than its historical average and cheaper compared to major retail rivals like Walmart and Costco, as well as tech giant Apple. This valuation drop is attributed to Amazon's focus on efficiency and cost-cutting, which has improved profitability. Despite a broader market selloff, Wall Street analysts remain positive about Amazon's fundamentals, particularly its e-commerce and cloud-computing business, Amazon Web Services (AWS).
However, Amazon faces near-term challenges, including economic uncertainty and tariffs affecting consumer spending and AI service adoption. While AWS revenue grew by 19%, it did not meet expectations due to capacity constraints. Amazon plans to invest heavily in AI-related infrastructure, with a US$100 billion expenditure this year. Investors are concerned about when these investments will yield tangible returns, and broader economic uncertainties could limit the rebound of big tech stocks despite attractive valuations.
Key takeaways:
Amazon shares are considered a bargain due to a drop in share price and expectations for long-term earnings growth.
The stock is trading at about 27 times its estimated future earnings, which is roughly half the 10-year average and below major retail rivals.
Amazon's profitability is below its long-term potential, with expected revenue growth of 9.6% this year and 10.4% in 2026.
Investors are focused on when Amazon's heavy spending on AI will pay off, amid broader economic uncertainty.
