It may seem odd to say at first, but among the “Magnificent Seven” stocks, one can argue that Amazon (NASDAQ:AMZN) is one of the quieter of the bunch. Although the tech behemoth is hardly in hiding, given the ubiquity of its brand, compared to other “Mag 7″ names, Amazon stock makes far fewer headlines.
Don’t get me wrong, this is a good thing. While fellow “Mag 7″ stocks garner a far greater number of positive and negative headlines, Amazon keeps plugging away, making progress in the further expansion of its e-commerce, cloud computing, and other businesses. At least, that’s a key take-away from Amazon’s latest earnings release.
Following the most recent fiscal results and updates from management, there’s even more reason growth-minded investors need to consider making AMZN a long-term holding.
Amazon Stock and its Latest Earnings Release
On April 30, Amazon released results for the fiscal quarter ending March 31, 2024. For the quarter, the company beat on both revenue and earnings. Revenue increased by 13% year-over-year, to $143.3 billion.
Amazon’s AWS cloud computing segment reported an even higher rate of year-over-year growth, at 17%.
Clearly, integrating generative artificial intelligence features into AWS is having a positive impact on growth. Overall, net income more-than-tripled. Chalk this up to strong results for Amazon’s domestic e-commerce and digital advertising segments, as well as because of a big jump in earnings for AWS.
Alongside these solid results, Amazon also provided investors with some promising updates. For instance, management announced plans to ramp up capital spending, as part of its efforts to capitalize on growing cloud-based AI demand.
Given these results and updates, it’s no surprise that Amazon stock has been trending higher since the earnings release.
Yet while shares are near record highs, and are up more than 70% over the past twelve months, it’s not as if you’ve missed the boat. Nor is it that you need to wait for a cool-down in enthusiasm to enter a position. Buying in at today’s prices could still prove very profitable.
The A to Z AI Bull Case
Currently trading for around 41.5 times forward earnings, at first glance Amazon stock may appear pricey, even for a “Mag 7″ component. Other names among this elite group of mega cap tech trade at forward multiples in the high-20s to mid-30s.
Some even trade at forward multiples in the low-20s. However, this valuation is more-than-sustainable for AMZN. As the gen AI growth trend charges ahead, growth re-acceleration of AWS is likely to continue.
Other segments of the company, including the e-commerce and digital advertising segments, are also benefiting from the integration of AI features. Hence, Amazon has “A to Z” exposure to this long-term growth trend.
Thanks to this multifaceted AI exposure, Amazon is well-positioned to grow its top line by low double-digits in the years ahead. That’s not all. While having a moderate impact on revenue growth, this growth re-acceleration could have a tremendous impact on the bottom line.
Forecasts call for earnings to grow by around 44% this year. During both 2025 and 2026, earnings could grow by nearly 30%. Even if AMZN maintains its current forward multiple, this level of earnings growth will most likely drive additional double-digit moves higher for shares.
Bottom Line: Make AMZN a Long-Term Buy and Hold
In addition to the “A to Z AI” bull case, there are some other factors at play that could help keep AMZN in high-growth mode for years to come.
For instance, as Amazon CEO Andy Jassy noted at the time of the earnings release, the company has plenty of room to further reduce costs and raise margins with the company’s legacy e-commerce segment.
Don’t forget, either, that down the road, once the cloud business reaches full scale and matures, there may be room to maximize margins for AWS as well. Although Amazon’s valuation takes into account the prospect of a long earnings growth runway, it’s not overly priced into the stock.
Hence, steady and strong revenue and earnings growth could easily translate into similarly sized price appreciation for Amazon stock between now and the end of the decade. With this, make it a long-term buy and hold at current prices.
On the date of publication, Thomas Niel did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.