Is Now a Good Time to Buy Amazon Stock?
Key Points
Amazon is the second-best-performing "Magnificent Seven" stock this year through May 7.
AWS should continue to grow impressively due to increased cloud and AI demand.
Amazon's advertising business has made $70 billion in the past 12 months.
It has been a good start to the year for Amazon (NASDAQ: AMZN), with the stock up 19.7% year to date through market close on May 7. Except for Alphabet, Amazon has been the best-performing "Magnificent Seven" stock this year.
Given Amazon's recent run-up -- up nearly 27% between April 7 and May 7 -- it's natural to wonder whether it's a good time to buy the stock or hold off in case of a pullback. If you're a long-term investor, it's definitely a good time to buy the stock. It's a blue chip stock you can comfortably hold for the long haul.
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Despite its dominance and size, Amazon is still well positioned to keep growing impressively over the foreseeable future. Its e-commerce business is becoming more efficient and profitable, which is a turnaround from the historical "just bring in the revenue and AWS will bring in the profit" model.
AWS -- Amazon Web Services -- remains dominant in the cloud industry, and growth is accelerating again as AI demand picks up and more companies need computing capacity and access to various AI models. AWS is admittedly constrained right now because demand is much higher than it can handle, but Amazon's $200 billion 2026 capital expenditure plans -- most of which will go to data centers and AI infrastructure -- should help address that problem.
One of the more overlooked business segments for Amazon is its advertising business. In the first quarter, its revenue increased by 24% year over year and is now at $70 billion over the past 12 months. Amazon has the data and eyeballs to make a valuable advertising platform, which should end up being a lucrative business for Amazon.
No need to overthink it; Amazon is built to be a good investment for quite some time.
Stefon Walters has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet and Amazon. The Motley Fool has a disclosure policy.