Amazon Stock Costs More Than the Market. I'd Still Buy It for the Next 5 Years.
The e-commerce and cloud giant already costs more than the average stock. Can it still beat an index fund through 2031?
Amazon's stock price recently surged past $262, nearing its all-time high of $284.02 from August. To gauge its value, comparing it to an S&P 500 index fund is useful, as it has averaged a 10% annual return over the past century, including dividends. While no single stock can match that long-term performance, Amazon's growth prospects appear promising.
Recent financial results show its operating income has tripled from $22.9 billion in 2020 to $80 billion in 2025, growing at around 28%. The company's cloud computing arm, AWS, contributed $54.7 billion to this figure, making up roughly 58% of Amazon's total operating income. Advertising sales also saw a 26% increase in the second quarter.
However, Amazon's heavy investments in infrastructure, primarily to fuel its AI initiatives, have led to significant capital expenditures, impacting cash flow. Despite this, analysts project Amazon's earnings to grow by around 15% annually through 2031, which could propel the stock to near $460 if the price-to-earnings ratio decreases from its current 25 times to around 22.
Even if Amazon fails to outperform the S&P 500 by much, the stock still seems a better long-term investment than a simple index fund, given its strong growth trajectory and focus on high-margin sectors.
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