Where Will Amazon Stock Be in 5 Years?

Amazon (AMZN) finished 2024 on a very positive note, showing an impressive gain of 44% over the year. As we move into the new year, Amazon is positioning itself to take full advantage of its e-commerce platform, aiming to increase its market share while also utilizing the capabilities of artificial intelligence (AI) to enhance its cloud services.

The start of 2025 is looking promising, but it's crucial to invest in stocks that have long-term growth potential. Let's explore where Amazon might find itself five years down the line.

E-commerce: Gaining Market Share

In recent years, Amazon has consistently expanded its share of the e-commerce market, with eMarketer projecting that it will exceed 40% of total U.S. e-commerce sales by 2024. Faced with stiff competition from smaller companies that emerged during the pandemic, Amazon has significantly improved its logistics and distribution networks, further solidifying its leading position.

One significant change was the shift from a national to a regional warehouse system. This strategy is important because physical retailers like Walmart and Costco leverage their widespread store locations for quick and cost-effective shipping. They can also offer omnichannel services, such as in-store pickup, a service Amazon lacks.

However, Amazon shines in providing rapid and cost-effective delivery for online purchases. The company is diversifying its product offerings to keep its Prime customers loyal. By enhancing delivery speed, Amazon increases the likelihood that customers will return for their daily needs. Notably, same-day order volumes rose by 25% year-over-year in the third quarter, and same-day delivery is among the company's most economical services. Additionally, a new warehouse model was tested in Louisiana, integrating advanced robotic technology, which has already reduced processing times by 25%, potentially lowering costs by the same margin.

In five years, Amazon is expected to hold an even greater share of the growing e-commerce market, providing organic opportunities for growth, even if the pace may slow as its size increases.

Cloud Computing and AI: Accelerating Sales

Amazon Web Services (AWS), the company's cloud computing branch, controls approximately 31% of the global cloud market, according to Statista. Microsoft’s Azure ranks second with 20%, showcasing Amazon's significant lead, though not as pronounced as in e-commerce.

As businesses resume normal spending after a period of inflation-related cutbacks, AWS has become increasingly popular, especially among companies interested in generative AI technologies.

This is due to Amazon's strong lineup of AI products and services designed to meet a wide array of business needs. AWS features a three-tiered system that includes tools for developers to build their large language models (LLMs), its Bedrock system for medium-sized enterprises, and plug-in solutions for smaller clients.

Sales within AWS accelerated by 19% year-over-year in the third quarter, with generative AI already generating over a billion dollars in revenue. Despite its current success, CEO Andy Jassy believes this space is just beginning and has vast long-term potential. He termed it "a once-in-a-lifetime opportunity" in a recent earnings call.

Five years from now, AWS is expected to continue its robust growth, accounting for a larger share of Amazon's operating income, which was 62% in the third quarter, further enhancing Amazon's profit margins.

Streaming: Staying Competitive

Streaming may not be the first venture to come to mind when thinking of Amazon, but the company remains competitive in this segment. With ownership of MGM Studios, Amazon has access to high-quality content that competes effectively with other major players.

The company has exclusive rights to Thursday Night Football, with the Cowboys-Giants game recently setting a record as the most-streamed regular-season football game. Amazon also boasts critically acclaimed shows like The Lord of the Rings: The Rings of Power.

To remain competitive, Amazon has introduced an ad-supported tier similar to offerings from Netflix and Walt Disney, thereby tapping into new revenue streams from advertising.

Looking ahead five years, Amazon is likely to enhance its streaming service further by adding fresh content, expanding its advertising business, and possibly pursuing additional acquisitions.

Everything Else

Amazon's advertising division has consistently been its fastest-growing segment. The platform's access to hundreds of millions of Prime members who are online shopping creates a significant draw for advertisers. Plus, its data-driven, AI-enhanced advertising tools provide substantial advantages for creating effective ad campaigns.

The company is continually acquiring new businesses and launching innovative products, resulting in more sales opportunities. Amazon is also investing in healthcare and expanding its pharmacy services, along with a series of strategic acquisitions in recent years.

A notable recent acquisition was that of AI firm Anthropic, signaling Amazon's commitment to expanding its AI capabilities.

What About Amazon Stock?

In 2024, Amazon stock outperformed the market, and it is set up to do so again this year. While the company has already created significant wealth for many investors, its growth potential remains substantial. Although it may not carry the risk of a startup, Amazon still holds potential for rewarding its investors over the next five years.

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