Founded in 1994, Amazon (AMZN) has established itself as a leader in e-commerce, cloud computing, streaming, artificial intelligence (AI), and logistics. With a market cap of $2.2 trillion, it is one of the world's most valuable and influential businesses.

No one who bought Amazon stock 20 years ago would regret it today. AMZN stock has soared a whopping 10,487.2% over the last 20 years. So far this year, Amazon’s stock has surged 37.5%, outperforming the S&P 500 Index’s ($SPX) gain of 25.7%.

While Wall Street expects around 36% upside in 2025, investors would be wise to buy and hold Amazon stock for the long haul to enjoy substantial gains. 

Amazon Reported Another Blowout Quarter

Amazon operates one of the largest e-commerce platforms in the world. However, Amazon Web Services (AWS), its cloud computing division, has become its most profitable division, generating significant cash flow and allowing Amazon to reinvest in other areas of its business. AWS leads the cloud computing market with a 32% share, outperforming Microsoft (MSFT) Azure and Alphabet's (GOOGL) Google Cloud.

Amazon has reported impressive revenue growth over the years, thanks to its diverse business model. Now, by leveraging AI, the company has increased growth across all of its segments. In the most recent third quarter, AWS generated $27.5 billion in revenue, a 19% increase year on year. 
In the quarter, net sales rose 11% to $158.9 billion, while earnings increased 52.1% to $1.43 per share, surpassing consensus estimates.

For the trailing 12 months ended Sept. 30, free cash flow stood at $47.7 billion. Amazon's balance sheet also showed $71.6 billion in cash, cash equivalents, and restricted cash. This financial strength will give Amazon the ability to fund ambitious growth projects in the near future.

Competitive Advantages Over Peers

The e-commerce and cloud computing markets are rapidly expanding, with both established and emerging players working to boost their market position. On the other hand, Amazon is already a globally recognized brand known for its focus on customer convenience. The company has included many benefits for Prime members, including faster delivery, access to exclusive content on Prime Video, membership deals, and much more.

As a result, Amazon Prime members are loyal, and this brand loyalty provides the company with a consistent customer base and recurring revenue from Prime membership fees. In the third quarter, Amazon introduced a number of new generative AI-powered features to improve customers' shopping experiences. These include Rufus, a generative AI expert shopping assistant; AI Shopping Guides; and Project Amelia, an AI assistant for sellers.

Furthermore, AWS is expected to continue driving profitability and allowing Amazon to reinvest in new growth areas such as AI, logistics, and healthcare. In the quarter, the company signed numerous AWS agreements with major corporations, including Sony (SONY), T-Mobile (TMUS), Toyota (TM), The Australia and New Zealand Banking Group Limited, Booking.com (BKNG), and many others.

Management expects fourth-quarter revenue to increase by 7% to 11% year on year. Analysts predict that Amazon's revenue and earnings will grow by 10.9% and 73.9%, respectively, in 2024. Earnings could increase by another 21% in 2025. 

Trading at 34 times forward 2025 earnings, the stock may be a little pricey. However, for those who believe in Amazon's ability to grow its revenue base, innovate, and diversify into new industries, the stock's high valuation may be justified by its long-term growth prospects.

Despite fierce competition in the AI space, Amazon's innovative efforts and diverse business model present a compelling growth story for long-term investors.

Is AMZN Stock a Buy, Hold, or Sell on Wall Street?

It's no surprise that Amazon stock is rated a "strong buy" on Wall Street. Following another strong quarter, analysts at Loop Capital Markets, Truist Financial, Needham, CMB International Securities, and many others all reiterated "buy" ratings on Amazon stock.

Out of the 49 analysts covering the stock, 45 have a “strong buy” rating, while three recommend a “moderate buy” and one rates it a “hold.” Its mean target price is $235.75, which implies an upside potential of 12.9% from current levels. 

Furthermore, the high target price of $285 suggests that the stock could rally as much as 36.5% over the next 12 months. 

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On the date of publication, Sushree Mohanty did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.