Should You Buy Amazon Stock in 2025?

As we move forward, Amazon (AMZN) has shown impressive performance in recent years. In 2023 alone, the stock price soared by 81%. Projections indicate that 2024 could yield another increase of nearly 50%. This raises an important question: Should you consider buying Amazon stock in 2025? Here, we explore the pros and cons of investing in this high-profile stock.

The Arguments Against Buying Amazon Stock

Starting with some concerns, one significant issue surrounding Amazon is its high valuation. After substantial gains over the past few years, the shares are currently trading at about 36 times their expected earnings. This valuation makes Amazon one of the most expensive stocks in the "Magnificent Seven" tech group, second only to Tesla.

Additionally, there are economic uncertainties that potential investors should consider. The Federal Reserve has expressed some hesitation regarding the number of interest rate cuts anticipated for 2025. Increased caution from the Fed about the U.S. economy could negatively impact Amazon's performance.

Moreover, there are concerns about the tariffs that President-elect Trump has promised to impose. Such tariffs could lead to higher prices for various products, resulting in declining consumer spending, which could hurt Amazon's sales and overall business.

Another point of concern is the potential slowdown in the artificial intelligence (AI) sector, which has significantly benefited Amazon Web Services (AWS). Recently, Alphabet and Google CEO Sundar Pichai commented on the challenges facing AI development, suggesting that the easiest advancements may already be behind us, which could mean slower growth for AWS and its competitors.

The Arguments for Buying Amazon Stock

Despite the criticisms, the argument for investing in Amazon is still compelling. While its valuation raises eyebrows, it's worth noting that Amazon has maintained higher earnings multiples in the past and has continued to see its stock price rise.

More significantly, Amazon's financial health is strong. In the third quarter of 2024, the company reported earnings of $15.3 billion, reflecting a remarkable 55% increase year-over-year. Additionally, free cash flow nearly tripled, reaching $44.9 billion.

While economic challenges could pose risks in 2025, it's also plausible that Amazon will maintain its positive trajectory in the near future and likely continue to thrive in the long run.

CEO Andy Jassy frequently discusses the growth potential in the cloud services market, expecting a significant shift from on-premises IT spending to cloud solutions over the next decade. This trend could provide AWS with substantial growth opportunities.

In addition, Jassy notes that a large portion of retail is still conducted in physical stores, with the e-commerce sector making up a smaller percentage. He believes that this balance will shift in the coming years, which would further benefit Amazon as the leader in online retail.

It is also worth mentioning that not everyone agrees with the notion that AI progress is slowing down. OpenAI CEO Sam Altman recently stated that the possibilities in AI continue to expand, implying that Amazon will likely stay at the forefront of these developments.

Conclusion

When considering Amazon stock, there are two key questions:

1. Will Amazon stock increase in 2025?
2. Should you purchase Amazon stock in 2025?

The answer to the first question is somewhat ambiguous. While there is a reasonable expectation that Amazon stock may rise, numerous factors could influence its performance.

As for the second question, many investors could find Amazon stock to be an attractive option. Although it does not provide dividends, it remains a strong pick for those seeking growth and have a long-term investment strategy.

Amazon, Stocks, Investment