Where Will Amazon Stock Be in 5 Years?

Amazon (AMZN) finished 2024 strongly, achieving a 44% increase over the year. More importantly, it enters the next year fully equipped to capitalize on its e-commerce platform and leverage artificial intelligence (AI) to enhance its cloud services.

As we move into 2025, it is important to focus on stocks with long-term growth potential. Let's explore where Amazon could be in the next five years.

E-commerce: Capturing Market Share

Amazon has progressively increased its share of the e-commerce market, with eMarketer predicting that it will account for over 40% of total U.S. e-commerce sales by 2024. Although it faced competition from smaller online retailers that emerged during the pandemic, Amazon has bolstered its logistics and operations to maintain and expand its market leadership.

The company has shifted to a regional warehouse system, which is crucial as traditional retailers utilize their store presence as distribution hubs. Major players like Walmart and Costco Wholesale are taking advantage of their numerous locations to ensure quick and cost-effective shipping while offering omnichannel services that Amazon does not.

Instead, Amazon adheres to its core strength: delivering fast and affordable shipping for online orders. The company continues to expand its product offerings, ensuring that its Prime members rely on it for all their needs.

By enhancing delivery speed, Amazon increases consumer retention for everyday essentials. Same-day deliveries rose by 25% year-over-year in the third quarter, a promising cost-effective strategy. A new warehouse model in Louisiana incorporates advanced robotics technology, resulting in a 25% reduction in processing time, which should also lower costs by a similar margin.

Looking ahead, it is plausible that Amazon will capture an even larger share of the growing e-commerce market, creating organic growth opportunities. However, as it gets bigger, growth rates may slow down.

Cloud Computing and AI: Boosting Revenues

Amazon Web Services (AWS), the cloud computing segment of Amazon, holds 31% of the global cloud market according to Statista. Its nearest competitor, Microsoft Azure, holds 20%. While this gap is not as expansive as in e-commerce, it is significant.

After periods of budget tightening during inflation, clients are ready to invest again, especially those eager to adopt generative AI technologies, gravitating towards AWS.

Amazon has created a comprehensive AI ecosystem with products and services tailored to various client needs. Management outlines a three-tier system featuring tools for developers to build their own large language models (LLM), the Bedrock system for medium-sized companies, and plug-in solutions for small businesses.

In the third quarter, AWS sales growth accelerated to 19% year-over-year, with generative AI becoming a billion-dollar sector. Amazon's CEO, Andy Jassy, describes this opportunity as monumental, noting it may be a once-in-a-lifetime event.

Five years from now, AWS is expected to continue its rapid expansion. With AWS accounting for 62% of Amazon's operating income in the third quarter, it is likely to enhance margins further.

Streaming: Maintaining Competitiveness

When considering Amazon, streaming may not be the first service that comes to mind, but it remains competitive in that space too. Owning MGM Studios provides Amazon with exclusive content that competes effectively against other leading platforms.

Amazon possesses exclusive rights to Thursday Night Football, and the recent Cowboys-Giants game became the most-streamed regular-season football match ever. Additionally, successful series like The Lord of the Rings: The Rings of Power contribute to its content portfolio.

Amazon has recently introduced an ad-supported streaming tier akin to Netflix and Walt Disney, combining it with a solid advertising framework to unlock new revenue potential.

In five years, Amazon is expected to remain competitive by continually adding fresh content, expanding its advertising approach, and possibly making more acquisitions.

Other Ventures

Amazon's advertising business has seen rapid growth, benefiting from its extensive Prime member base. This access provides advertisers immense opportunities, enhanced by Amazon's data-driven and AI-supported advertising tools.

The company is consistently acquiring new businesses and launching fresh products to drive growth. Recent investments in healthcare and pharmacy sectors, along with multiple acquisitions, exemplify this strategy.

Notably, Amazon's acquisition of AI firm Anthropic suggests a focus on expanding its AI business going forward.

Outlook for Amazon Stock

Amazon's stock outperformed the market in 2024, and it stands well-positioned for further success in the coming year. Despite its established status and substantial gains, the company possesses formidable growth opportunities ahead. Although it may not be as agile as a startup, it carries lower risks compared to newer firms. Therefore, Amazon's stock is likely to yield substantial rewards for investors over the next five years.

Amazon, Stock, Market