Amazon's Future Rises as Stock Price Falls: A Long-Term Investment Vision

Amazon is a stock I am very interested in right now especially with the recent price drops that it has been experiencing since its 2Q25 results.

A summary of Amazon as stated by Fiscal.ai: "Amazon.com, Inc. engages in the retail sale of consumer products and subscriptions through online and physical stores in North America and internationally. The company operates through three segments: North America, International, and Amazon Web Services (AWS). Its products offered through its stores include merchandise and content purchased for resale; and products offered by third-party sellers The company also manufactures and sells electronic devices, including Kindle, Fire tablets, Fire TVs, Rings, Blink, eero, and Echo; and develops and produces media content. In addition, it offers programs that enable sellers to sell their products in its stores; and programs that allow authors, musicians, filmmakers, Twitch streamers, skill and app developers, and others to publish and sell content. Further, the company provides compute, storage, database, analytics, machine learning, and other services, as well as fulfillment, advertising, and digital content subscriptions. Additionally, it offers Amazon Prime, a membership program. The company serves consumers, sellers, developers, enterprises, content creators, and advertisers. Amazon.com, Inc. was incorporated in 1994 and is headquartered in Seattle, Washington."

Before I get into my projections and what I took away from their recent earnings calls, here is my pros and cons to investing in AMZN.

Bull:

• Their E-commerce platform is the undisputed leader especially with its robust options for customers and the scale of its logistics network
• AWS being one of the best cloud services available to companies; especially with a growing need for this industry it continues to validate this segment of the business
• Ads; this one is not really something that is not talked about much, but in being able to take data and create more efficient and targeted ads, this creates a great opportunity for outside businesses to purchase into since they have such a large online retail space and prime video network
• Continually grows revenue and earnings year after year
• Commitment to CapEx for developing AI, data center and other growth areas for the company

Bear:

• AWS revenue not hitting a 20% yoy return after 2Q25 with actual results coming in at about 17.5% yoy
• Growing competition in cloud segment
• Continuing restraints from issues with power and also chips which is holding back their growth
• Tariff uncertainty

2Q25:

EPS: $1.68 (est. $1.31)

Revenue: $167.7 Billion (est. $162.09 Billion)

Net Sales: +13% yoy

• NA Sales: +11% yoy
• International: +16% yoy
• AWS Sales: +17.5% yoy

Operating Cash Flow: +12% yoy

FCF: Decreased to $18.2 Billion

Highlights

• Held largest Prime day on record
• Added new brands including:
  • Away
  • Aveda
  • Marc Jacobs Fragrances
  • Milk Makeup
  • Origins
  • Nike
• Increased Project Kuiper's satellite internet with 2 successful launches
• Signed new AWS agreements with:
  • PepsiCo
  • Peloton
  • Nissan Motor Co.
  • SAP
  • Twelve Labs
  • Iberia Airlines
  • NatWest Group
  • Airbnb
  • London Stock Exchange
  • Git Lab
  • Warner Brothers Discovery Sports
  • FICO
  • Sk Telecom
• Launched Nova Act: Makes it easier for customers to build agents that can take automated actions across websites
• Multi-billion dollar investment to expand cloud infrastructure and advance AI innovation in North Carolina, Pennsylvania and Australia
• Announced new AWS Offerings:
  • Kiro
  • Bedrock Agentcore
  • General availability of AWS Transform
  • Strands Agents
  • AI agents and tools in AWS marketplace
  • New foundation models in Amazon Bedrock
  • General availability of Amazon EC2 Instances
    • Powered by NVIDIA Grace Blackwell superchips
    • AWS's most powerful GPU-accelerated instance for training and deploying the largest most sophisticated AI models
• General availability of Oracle database at AWS for seamless migration of Oracle Exadata and RAC workloads
• Amazon S3 Vectors
• Introduced Deep Fleet: AI model that improves Amazon's internal robot efficiency
• Introduced Vulcan: Robot that uses sight and touch to navigate clustered spaces
• Also announced that Kupier should enter beta later this year or early next year

3Q25 Guidance:

• Net Sales: $174-$179.5 Billion
  • Or grow 10%-13% compared to 3Q24
• Operating Income: $15.5-$20.5 Billion

Overall I was very impressed from the call and feel very good about the companies long term future. The only two negatives I took from it was AWS not growing to revenue expectations and then also during the Q and A they were asked about AI innovation and so on, and they never really never answered the questions and were just very vague. However they have so many pipeline projects that if they are also able to launch successfully I feel very good that Amazon will continue to destroy the market.

Data/Price Projections:

Sustainable Growth Rate Projeciton:

Historical Growth Rate Projection

Current Valuation I hold for AMZN: $234.75 (+10.9%)

2 Year Projection: $268.52 (13.43% annual RoR)

5 Year Projection: $436.71 (21.27% annual RoR)

10 Year Projection:

• Upside: $674.07 (21.85% annual RoR)
• Downside: $561.72 (16.54% RoR)

The only issue with my projection is that it does not take into account with future growth from pipeline projects and so on; so I feel like these projections will be somewhat conservative. With my price I am willing to pay for I am going to set it at $250 for right now but with a priority target of $235 as the $235 would lead to my 10 year annual return of 20%. Since I do believe that their full growth potential isn't fully shown by these numbers that is why I am raising my price a little bit from the actual number that I got when I ran my equations.