As of this writing on the afternoon of May 15, the S&P 500 index is back in positive territory in 2025. The closely watched benchmark has had a volatile year, pressured by trade uncertainties. However, it has come roaring back since early April, showcasing improving investor enthusiasm.
Some businesses still have a long way to go to recoup all their losses. Shares of a dominant tech-driven firm have soared 850% in the past 10 years, even though they currently trade 15% below its record high. This presents an opportunity.
Here's why this monster stock is a smart buy right now to hold for the next five years.
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Positioned to benefit from multiple growth engines
There's no question that investors have heard of e-commerce juggernaut Amazon(NASDAQ: AMZN). The retail leader attracts nearly 40% of all online spending in the U.S., positioning it to gain from the ongoing growth of e-commerce shopping. Recent tariff pauses should instill more confidence in both Amazon's merchants and its shoppers.
The company's online marketplace had 2.6 billion visitors in the month of April. That's a lot of attention that is now starting to be monetized by the business. In the first quarter, Amazon raked in $13.9 billion in advertising revenue. This activity might get overlooked by other parts of the company, but it is quickly becoming a more important financial driver.
Digital advertising surely produces a high margin, which can boost Amazon's profitability over time. It's also worth pointing out that only Alphabet and Meta Platforms have greater market share in the digital ad industry.
Amazon Prime Video, which has more than 200 million subscribers, is a leading streaming service. The ongoing cord-cutting trend has pushed consumers to internet-enabled solutions.
It might not seem like it, but we're still in the early innings of corporations shifting their IT spending from on-premises to the cloud. Amazon CEO Andy Jassy estimates that only 15% has moved to the cloud so far. With Amazon Web Services (AWS), the company owns an industry-leading cloud computing platform that just registered a superb 39.5% operating margin in Q1.
AWS also naturally makes the business a leader when it comes to artificial intelligence (AI). Amazon is developing its own graphics processing units. However, AWS has a wide range of products and services that allow its clients to better leverage the power of AI within their own operations.
Any business would be lucky to ride the wave of one powerful secular trend. With e-commerce, digital advertising, streaming entertainment, cloud computing, and AI, Amazon is in an unrivaled position to figure out ways to drive durable growth in the long run.
Is Amazon a no-brainer stock to buy?
There certainly aren't many stocks that have come close to Amazon's performance. Just in the past two decades, shares have catapulted 12,010% higher. But with the stock trading 15% below its peak, investors can buy at a price-to-sales ratio of 3.4. That's in line with the past five-year average, which I think is a good deal.
With trailing 12-month net sales of $650 billion and a market cap of $2.2 trillion, investors might be worried that Amazon lacks potential to produce an adequate return going forward. But consider that this same argument -- mainly that its massive scale creates a headwind -- could've been used five or 10 years ago. However, the stock still performed well for investors.
According to Wall Street consensus analyst estimates, the company is projected to increase revenue and earnings per share at compound annual rates of 9.4% and 17.5%, respectively. Given the powerful growth tailwinds outlined above, there is reason to believe the company can drive sustainable financial gains for a very long time. This makes Amazon a good stock to buy now and hold for five years.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, and Meta Platforms. The Motley Fool has a disclosure policy.
