3 Reasons to Buy Amazon Stock Like There's No Tomorrow

Very few companies have come to dominate their respective industries with a massive user base and tremendous success quite like Amazon (AMZN 3.18%). And the business has won over investors. Its shares have catapulted 10,130% higher in the past couple of decades, although they've taken a breather, recently down 8% from their all-time peak (as of Nov. 22).

Amazon has a gargantuan $2.1 trillion market cap, so you might be wondering if this "Magnificent Seven" stock is still a good opportunity. Here are three reasons to consider buying Amazon like there's no tomorrow.

1. Amazon's staying power

When a business has an economic moat, it's a sign of a high-quality enterprise that can defend itself from competition. Amazon has multiple competitive strengths that have supported its success.

The online marketplace -- which brings together shoppers, merchants, and advertisers -- becomes more valuable to all stakeholders as it expands. This creates network effects.

Amazon operates a colossal logistics network after years of heavy investment to bolster its supply-chain capabilities. This gives the business cost advantages when shipping products to consumers.

All of the various product and service lines Amazon offers means that it has virtually unlimited touch points with its customers. Consequently, Amazon has an unrivaled ability to constantly collect treasure troves of data that can inform strategic decisions.

If you're a long-term investor who aims to buy and hold stocks for several years, it's critical to focus on companies that possess a moat. This means the business has staying power and the ability to successfully fend off rivals and new industry entrants, protecting itself from the ongoing threat of disruption.

Amazon excels in this regard. The leadership team has positioned the company well to thrive over the long haul, just as it has done in the past.

2. Powerful growth drivers

Investing in companies that gain from powerful secular trends is a worthwhile strategy, but it's not often you can find a business that is riding multiple trends at the same time. This is precisely what Amazon is doing.

Everybody knows that this company is the king of the e-commerce sector. A whopping 38% of online sales in the U.S. happen on amazon.com. That's a monster lead that puts the company in an advantageous position to capture a sizable chunk of the growth of the e-commerce industry's sales.

It's difficult for anyone to compete with Amazon's fast and free shipping on millions of items. And with the recent launch of Amazon Haul, the company is further strengthening its position to cater to value-conscious shoppers and their needs.

Amazon Web Services (AWS) is the leader in the global cloud computing market and has typically been the key growth and profit driver for the overall business. According to Grand View Research, the cloud market is expected to grow about 21% annually between now and 2030, eventually becoming a $2.4 trillion industry.

This means that there's still a huge migration left to happen for companies of all sizes to shift their IT spending from on-site to off-premises. AWS is undoubtedly in a wonderful position to continue growing rapidly through the rest of the decade.

3. Valuation and earnings

Amazon is not only one of the world's largest companies, but it's also one of the best-performing stocks ever. However, the current valuation still looks reasonable. The price-to-sales ratio of 3.4 is in line with the trailing-10-year average.

The shares trade at a price-to-earnings multiple of 42.2. That doesn't look like a bargain, but consider that Amazon's diluted earnings per share (EPS) jumped 94% year over year in the first nine months of 2024. And Wall Street consensus analyst estimates call for EPS to rise at a compound annual rate of more than 21% between 2024 and 2026.

Given the impressive bottom-line trajectory, the valuation is justified. This is another reason to scoop up the stock.