Is Amazon a Buy, a Sell or a Hold in 2025?

For many, the arrival of fall means shopping, eating and spending time with family.

But it's also a good time to evaluate your portfolio and consider which stocks you should buy, keep holding, or sell, keeping a long-term perspective in mind. Just as you make your plans and goals for next year, companies will begin to publish their strategies and financial goals for next year and beyond.

Amazon (NASDAQ:AMZN) has certainly pleased investors over the years. Over the past five years, the stock's gain has exceeded value by 118% S&P 500 by around 22 percentage points. Given the company's long-term growth prospects and valuation, can this continue?

The cloud

Amazon Web Services (AWS), the company's cloud computing business, may not be the first thing that comes to mind when most people think of Amazon. However, the company remains in a strong position to continue growing sales and profits.

AWS, which houses large data centers, helps companies use data to make better decisions. It is a sector that continues to grow rapidly. And AWS has the highest market share in this attractive segment, estimated at 31% in the first quarter. Its main competitors, Microsoftis Azure and alphabetGoogle Cloud had a share of 25% and 11% respectively. Amazon continues to invest, including in machine learning and artificial intelligence, to maintain its competitive advantage.

AWS continues to perform well. Second-quarter revenue rose 18.7% to $26.3 billion. Although it accounted for 18% of Amazon's revenue, it accounted for 64% of operating income. AWS achieved an operating margin of 35.5%, well above the North American and International segments.

Other companies

Amazon's other divisions reported increasing sales. This includes items such as online retail sales, subscription services and advertising.

Sales in North America rose 9% to $90 billion and operating profit rose nearly 58% to $5.1 billion. The international company's revenue rose 7% to $31.7 billion and generated a profit of $273 million, compared to a loss of $895 million a year earlier.

While sales increased across various categories, advertising posted growth of at least 20% for several consecutive quarters. This includes a 20% increase in the second quarter to $12.7 billion. Amazon has become a particularly desirable place for advertising due to its large number of users and data that advertisers can use to target their audience.

Management expects third-quarter company-wide revenue of $154 billion to $158.5 billion, representing year-over-year growth of 8% to 11%. However, operating income was estimated to be in a broad range of $11.5 billion to $15 billion. That's up 3% to 34% from $11.2 billion in the same period last year.

The story continues

The decision

Amazon's stock price rose 44.6% last year, comfortably outpacing the S&P 500's 34.4% gain. The company, once known for penetrating markets and increasing sales while reporting losses, is now extremely profitable. And the market continues to applaud the company's performance.

Investors also assume that Amazon will continue to perform well and that the stock will outperform the overall market based on its current valuation. Amazon shares have a price-to-earnings (P/E) ratio of 45 compared to 30 for the S&P 500.

That doesn't leave much room for error, but its highly profitable AWS business remains poised to take advantage of the big market opportunity. Since the company is a popular shopping destination that offers convenience, low prices, and easy returns, growth in its other divisions is unlikely to decline.

Therefore, despite the relatively high valuation, I would buy shares at this point.

Don't miss this second chance at a potentially lucrative opportunity

Have you ever felt like you missed the boat when it came to buying the most successful stocks? Then you'll want to hear this.

On rare occasions, our expert team of analysts will provide one “Double Down” shaft Recommendation for companies that they think are about to collapse. If you're worried you've already missed your investment opportunity, now is the best time to buy before it's too late. And the numbers speak for themselves:

• Amazon: If you had invested $1,000 when we doubled in 2010, You would have $21,285!*

• Apple: If you had invested $1,000 when we doubled in 2008, You would have $44,456!*

• Netflix: If you had invested $1,000 when we doubled in 2004, You would have $411,959!*

Right now we're issuing “Double Down” warnings for three incredible companies, and such an opportunity may not happen again in the near future.

See 3 “Double Down” Stocks »

*Stock Advisor returns from October 14, 2024

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Lawrence Rothman, CFA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon and Microsoft. The Motley Fool recommends the following options: long $395 January 2026 calls on Microsoft and short $405 January 2026 calls on Microsoft. The Motley Fool has a disclosure policy.

Is Amazon a Buy, a Sell or a Hold in 2025? was originally published by The Motley Fool