because Amazon (NASDAQ: AMZN) It is part of the "magnificent seven", and investors will naturally be curious about the company's situation next year. Built on pioneering two key industries, the group continues to grow in these businesses, it wisely positions itself to thrive in almost any economic environment. Under such conditions, its long-term success may continue.
Nevertheless, its near-term prospects are uncertain. Amazon has a market capitalization of about $2 trillion, with a decline in valuation and appears to be becoming a mature company. Does this mean investors should buy now, or should they get involved in recent uncertainty before adding stocks?
Granted, investors may be disappointed with Amazon's performance in recent months. The stock has no net earnings over the past year, and has fallen more than 25% since its peak in early February.
This pullback greatly reduces its valuation premium. Its P/E ratio exceeded 100 times two years ago and has steadily declined and is now at 30.
Over the past few years, one might assume that relative discounts make stocks a buy. Still, Amazon's huge size may not be the only reason for its compression multiples. The company has just released its first quarter 2025 earnings report and reveals some recent challenges.
In the first quarter, online sales grew 7% in the same period last year, and online sales grew to 6%. Investors are already accustomed to the rapid growth of its cloud computing division, Amazon Web Services (AWS). Nevertheless, its annual growth dropped slightly to 17% in Q1, compared with 18% in 2024.
Its third-party seller services business has also slowed down. After continuing to release double-digit percentage growth, its growth rate slowed to 7% in Q1. Uncertainty plus tariff issues, as these issues may affect online sales and third-party seller services.
However, it is not clear how tariffs ultimately affect sales. Dozens of countries are reportedly engaging in trade agreements renegotiated with the United States, just because tariffs are just the cause of short-term headwinds.
Additionally, Amazon is the first e-commerce company and cloud provider, both industries growing further. Grand View Research predicts the e-commerce industry to grow at a CAGR of 19% and cloud computing by 2030. So even if Amazon’s massive scale and massive patterns could hinder high percentage points growth, it also suggests that the company’s expansion continues.
Despite slowing net sales growth, its net revenue in the first quarter was $17 billion, up 64% from the same period last year. During this period, its operating margin increased to 11.8% as the company retained its costs and expenses, compared with 10.7% a year ago. Therefore, the stock may not be as troublesome as the meaning of a decline in net sales growth, which could make Amazon a value stock with its current earnings multiple stocks.
Given the situation of Amazon stock, it could rise next year. A relatively low P/E ratio does not make the company itself a purchase, and slower net sales growth should involve investors. But with the upcoming trade deal, tariff concerns may not significantly affect the stock one year from now.
Additionally, Amazon’s two major industries are likely to continue to grow rapidly for the rest of the decade. Therefore, even if its profits do not match that growth rate in the first quarter of 2026, investors should benefit from substantial profit growth. This situation makes Amazon stock more likely to be higher from now on.
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John Mackey, former CEO of Amazon's subsidiary Whole Foods Market, is a member of the board of directors of Motley Fool. Will Healy has no position in any of the stocks mentioned. Motley Fool has a place and recommends Amazon. Motley Fool has a disclosure policy.
Where is Amazon stock in 1 year? Originally published by Motley Fool