Amazon Stock Forecast 2025: Why You Should Buy AMZN Stock When It’s Down

The Q2 earnings season was a mixed bag for the “Magnificent 7” stock, with only Meta Platforms (META) managing to put up a truly impressive set of numbers. After the close on Thursday, both Apple (AAPL) and Amazon (AMZN) released their respective June-quarter results. While AAPL is trading higher today after its earnings beat expectations, shaking off widespread selling pressure in the stock market, Amazon is trading significantly lower after the e-commerce giant missed Q2 revenue estimates and its Q3 forecasts fell short of Street estimates.

Interestingly, Wall Street analysts were fairly bullish on AMZN stock before the Q2 earnings call, so the report was a disappointment even as the company beat earnings per share (EPS) estimates. In this article, we’ll take a look at Amazon’s earnings and analyze whether it makes sense for long-term investors to buy the stock on the dip.

Why are Amazon shares falling after Q2 results announced?

While revenue at enterprise-focused Amazon Web Services (AWS) beat Wall Street estimates and rose nearly 19% year over year, sales at its online store rose just 5%. Amazon’s advertising business saw revenue rise 20% in the second quarter, but sales fell just short of consensus estimates.

Amazon’s outlook also disappointed markets for the third straight quarter. The company forecast Q3 revenue in a range of $154 billion to $158.5 billion, which — at the midpoint — was below the $158.2 billion that analysts were modeling. Management forecast Q3 operating income in a range of $11.5 billion to $15 billion, which was also below the $15.3 billion that analysts were expecting.

Is it worth buying Amazon stock when the price is falling?

I think Amazon stock looks like a buy after today’s drop for the following reasons:

1. AWS and AI capabilities

While the AWS segment has faced a number of headwinds over the past few years, its growth has not only stabilized but also accelerated from its troughs. During the earnings call, Amazon CEO Andy Jassy highlighted three trends that he believes will drive AWS growth:

• Companies have already completed the cost optimization process and are now looking for new initiatives;
• Businesses are moving from on-premises infrastructure to the cloud;
• Enterprises see artificial intelligence (AI) as a huge opportunity that will lead to greater demand for AWS.

Jassy was quite bullish on the AI ​​capabilities, saying that “the company’s AI business continues to grow rapidly, reaching multi-billion dollar revenues, even though it’s still early days.” In addition to fueling AWS’s growth, generative AI is improving customers’ shopping experiences on Amazon’s e-commerce platform.

2. Potential in the advertising business

Amazon’s advertising business has annual revenues of more than $50 billion, and the company has potentially years of rapid growth ahead as it increases video advertising on its ad-supported version of Prime.

3. The continued shift to e-commerce

The shift from retail to e-commerce is expected to continue, which is good for Amazon. The company is working to further improve its shipping speeds, which should help drive sales of everyday and non-durable items and increase its share of customers’ wallets. While these items have lower average prices than other products on Amazon, their sales make the platform even more appealing to consumers. While competition from Temu and Shein has intensified, Amazon is reportedly looking to launch a similar platform to take on these popular apps. The focus on pharmacy and business-to-business (B2B) segments will also drive long-term growth, as both are relatively unexplored opportunities for Amazon.

Overall, I agree with Jassy’s closing comments during the Q2 earnings call: “There are a lot of reasons to be optimistic about the next few years.”

Amazon Stock Forecast 2025

Amazon is currently grappling with a challenging and uncertain macroeconomic environment, with customers shifting to cheaper alternatives. According to CFO Brian Olsavsky, consumers are “cautious” and “looking for opportunities.” He added that forecasting for the third quarter was difficult due to major events like the Olympics and the U.S. presidential election. Additionally, the company said consumers are holding off on purchases amid all the uncertainty.

However, I believe these are short-term headwinds, and given Amazon’s presence in many high-growth areas such as e-commerce, cloud, artificial intelligence, streaming, and digital advertising, this stock ranks among the names that are perhaps almost Always candidate to buy at a low. Valuations don’t look too promising at these levels, especially considering the kind of revenue and profit growth Amazon brings to the table.

Overall, I think Amazon’s outlook for the next few years looks promising, even if the company didn’t impress with its Q2 earnings and Q3 outlook. For investors looking to hold onto the stock through 2025 and beyond, Amazon looks like one of the best stories still available at reasonable valuations.

On the date of publication, Mohit Oberoi held positions in: AAPL, AMZN, META. All information and data in this article is for informational purposes only. For more information, please refer to Barchart’s Disclosure Policy here.