What’s Behind The 150% Rise In Amazon Stock?

Amazon stock (NASDAQ: AMZN) has experienced approximately a 10% decline year-to-date, reflecting growing investor unease about potential trade tensions. President Trump has proposed a 25% tariff on automobile imports, and has signaled potential further tariff increases on European and Canadian goods if he perceives any economic detriment to the United States. ^[1]

Despite this recent dip, AMZN stock remains 145% higher when viewed over a longer timeframe from early 2023. This can primarily be attributed to:

1. a 104% rise in the company’s P/S ratio to 3.4 now, versus 1.7 in 2022;
2. a 24% rise in the company’s revenue from $514 billion to $638 billion; partly offset by:
3. a 3% rise in total shares outstanding to 10.6 billion.

We’ll delve into the specifics of these factors. Our dashboard on Why Amazon Stock Moved has more details. While AMZN stock has had a great run, if you want an upside with a smoother ride than an individual stock, consider the High-Quality portfolio, which has outperformed the S&P, and clocked >91% returns since inception.

With 24% Annual Growth Rate, AWS Is Driving Amazon’s Expansion

Amazon’s robust revenue growth is propelled by powerful long-term trends in e-commerce, streaming, and digital advertising. As the undisputed leader in online retail, the company commands an impressive 38% market share in the U.S. digital shopping landscape. This dominant position enables Amazon to create multiple revenue streams, particularly through its innovative advertising model that generates income both from ad placements and subsequent product sales.

The company’s strategic diversification has been key to its success, with Amazon Web Services (AWS) emerging as a particularly valuable segment. Between 2020 and 2024, AWS demonstrated remarkable growth, expanding at an average annual rate of 24.4% — significantly outpacing the North America (13.2%) and International (8.7%) segments. This performance reflects Amazon’s years of strategic investment in infrastructure, including extensive data centers, e-commerce platforms, and logistics networks.

Looking ahead, while AWS remains the primary growth engine, Amazon faces potential challenges. The cloud computing landscape is becoming increasingly competitive, with Microsoft Azure and Google Cloud making significant strides. Microsoft’s deep partnership with OpenAI and substantial AI investments could provide a competitive advantage, while Google is rapidly expanding its generative AI cloud services. These developments suggest that Amazon will need to continue innovating to maintain its market leadership in the rapidly evolving tech ecosystem.

Amazon has spent years scaling operations, and it may now be seeing the fruits of those long-term strategic investments. The company’s ability to adapt and diversify across multiple high-growth sectors continues to position it as a formidable player in the digital economy.

What’s Behind The 2x Rise In Valuation Multiple?

Amazon’s AWS segment has been a critical driver of the company’s financial transformation, significantly enhancing overall profitability. Between 2022 and 2024, Amazon’s operating margin dramatically expanded from 2.4% to 10.8% — a remarkable five-fold increase. This improved financial performance, coupled with strong sales growth and AWS’s strategic expansion, has reshaped investor sentiment.

The company’s price-to-sales valuation multiple nearly doubled during this period, rising from 1.7x in 2022 to 3.4x in 2024, reflecting renewed investor confidence. This shift occurred against the backdrop of a challenging market environment, particularly the inflation shock of 2022 that precipitated a severe stock market correction.

During this tumultuous period, Amazon’s stock experienced a sharp decline, falling 52% from its January 2022 high of $170.40 to $81.82 by December 2022 – a more pronounced drop compared to the S&P 500’s 25.4% peak-to-trough decline. The stock’s recovery was gradual, with Amazon fully returning to its pre-crisis peak only by February 2024, underscoring the challenging market conditions and the company’s resilience.

But What Next? Is AMZN Stock A Buy At $200?

At its current price of $200, Amazon’s stock is trading at a price-to-sales (P/S) ratio of 3.4x, which aligns closely with its five-year average of 3.2x. However, there are compelling reasons to believe the valuation multiple could expand further.

The company’s strategic investments in AI present a significant growth opportunity across multiple business segments. In AWS, the anticipated increase in businesses developing and deploying AI applications is expected to drive cloud infrastructure demand, directly boosting sales. Concurrently, Amazon’s retail operations stand to benefit from AI-enhanced capabilities, including more sophisticated product recommendations, improved search functionality, and a more personalized shopping experience.

These AI-driven improvements have the potential to increase conversion rates and average order value while simultaneously enhancing ad targeting both on Amazon’s platform and across the broader digital advertising ecosystem. The company’s sales are projected to grow in the low double-digits over the next three years, with bottom-line growth expected to be substantially more pronounced.

The combination of improved profitability, continued AWS expansion, and Amazon’s ability to maintain its dominant market share in online retail creates a robust argument for potential valuation multiple expansion. Investors are likely to view these strategic initiatives as key drivers of future growth and value creation. We estimate Amazon’s valuation to be $244 per share, reflecting a 20% upside from here. Our forecast is based on a P/S ration of 4.1x, 20% higher than the current 3.4 figure.

While AMZN stock looks like it may see higher levels, it is helpful to see how Amazon’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.

[1] Returns as of 3/27/2025
[2] Cumulative total returns since the end of 2016

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1. Trump says larger tariffs could be imposed on Canada, EU if they cause US economic harm, March 27, 2025, Reuters [↩]