Where Amazon Stock May Be in 5 Years

Amazon (AMZN) concluded 2024 on a positive note, with its share price rising 44% over the year. As it heads into the new year, the company is well-prepared to utilize its e-commerce platform for expanding market share and is set to harness the capabilities of artificial intelligence (AI) to enhance its cloud services.

2025 is off to a promising start, making it essential to consider stocks with long-term growth potential. Let’s explore where Amazon might stand in five years.

E-commerce: Expanding Market Share

Amazon has consistently increased its share in the e-commerce sector in recent years. According to eMarketer, it is expected to account for over 40% of all U.S. e-commerce sales by 2024. Though it faces competition from smaller firms that launched online during the pandemic, Amazon has strengthened its logistics and overall position.

The company has recently transitioned from a national warehouse system to a regional one. This move is significant, especially as physical retailers like Walmart and Costco utilize their vast store networks as distribution hubs. These retailers can ship orders swiftly and offer in-store pickup—options that Amazon cannot easily provide.

Instead, Amazon focuses on delivering the fastest and most cost-effective solutions for online purchases. The company is continually adding products to ensure that customers with Prime memberships consider it their go-to for a wide array of needs.

By enhancing delivery speeds, the company increases the likelihood that customers will rely on it for both essentials and other items. Furthermore, it is actively working to reduce costs. In the third quarter, same-day order volume rose by 25% compared to the previous year. Such immediate deliveries also represent one of Amazon's most economical operational strategies. Recently, a new warehouse model trialed in Louisiana, which incorporates advanced robotics, has cut processing times by 25%, promising a 25% decrease in operational costs.

In five years, as Amazon captures more of the growing e-commerce market, it will likely continue to face different growth rates, though the overall market itself is expanding.

Cloud Computing and AI: Boosting Sales

Amazon Web Services (AWS), the company’s cloud division, currently holds a 31% share of the global cloud market, according to Statista. Its closest competitor, Microsoft Azure, trails with a 20% share. While the gap in market presence is narrower compared to e-commerce, AWS still boasts a substantial lead.

After a period of cautious budgeting during high inflation, clients are now ready to spend again, particularly those looking to embrace generative AI technology on AWS's platform.

Amazon has built a robust AI framework that caters to various client needs. This framework includes a three-tier system, which comprises tools for developers to create their own models, a dedicated platform for medium-sized businesses, and solutions for smaller enterprises.

AWS experienced a surge in sales growth, reaching 19% year over year in the latest quarter, with generative AI already generating significant revenue. CEO Andy Jassy emphasizes the enormous long-term potential in this space, calling it a rare opportunity.

Over the next five years, AWS is expected to maintain strong growth and continue providing a significant portion of Amazon's operating income—62% in the third quarter—helping expand profit margins as well.

Streaming: Staying Competitive

When most people think of Amazon, streaming might not be the first thing that comes to mind, yet it remains competitive in this arena. Owning MGM Studios gives Amazon access to high-quality content that competes with other major players.

The company holds broadcasting rights for events like Thursday Night Football, with recent games, such as Cowboys vs. Giants, achieving record-breaking viewership. Additionally, successful series like The Lord of the Rings: The Rings of Power enhance its portfolio.

Recently, Amazon launched an ad-supported streaming tier similar to those of Netflix and Walt Disney, utilizing its strong advertising business to generate fresh revenue opportunities.

In five years, Amazon is poised to remain competitive by continually adding engaging content, expanding its advertising capabilities, and possibly considering further acquisitions.

Other Ventures

Advertising has become one of Amazon's fastest-growing sectors. The ability to reach its extensive base of Prime members offers a significant advantage to advertisers. Amazon's data-driven, AI-enhanced tools equip advertisers to optimize their campaigns.

The company frequently acquires new businesses and introduces new products, continually creating revenue opportunities. Its investments have stretched into healthcare, along with a variety of acquisitions made in recent years.

The recent acquisition of AI firm Anthropic points towards a continued focus on expanding its AI operations in the future.

Outlook for Amazon Stock

Amazon's stock outperformed the market in 2024, and it appears well-positioned to continue this trend. Even though the company has produced many wealthy shareholders, its growth potential remains promising. While it may not have the volatility of a startup, it presents a lower-risk investment. Amazon stock is expected to yield significant rewards for investors over the next five years.

Amazon, Stock, E-commerce, Cloud, AI, Streaming, Advertising