Should You Buy Amazon Stock Before Oct. 29?

Corporate America is entering earnings season for the quarter ending September 30, 2024. This is a critical period as investors deal with high inflation, increasing interest rates, turbulence in the AI industry, and a historically expensive valuation of the S&P 500 index. Amazon (AMZN -4.57%) is an important company in this sector, as it is at the forefront of the AI boom.

Amazon's cloud platform, AWS, is scheduled to release its operating results on October 29, 2024. AWS is the fastest growing and most profitable segment of Amazon, so investors will be closely watching the report. AWS operates data centers worldwide, housing advanced AI chips from suppliers like Nvidia, which it rents to customers and also sells them.

The company's revenue from AWS was $42.2 billion in the second quarter of 2024, up 37% from the previous year. AWS also has a library of 100 ready-made large language models (LLMs) and an AI-powered coding assistant, Kiro. The company's order backlog with customers waiting for more data center capacity is $496 billion, which is a significant increase from the previous year.

Amazon's CEO, Andy Jassy, believes AWS could reach $1 trillion in annual revenue in the long term. While AWS has contributed to Amazon's earnings growth, the company's overall earnings have improved due to its e-commerce business becoming more profitable. However, investors should be aware that $69 billion of Amazon's pre-tax profit in the first half of 2024 came from paper gains related to its investment in Anthropic, which is unrelated to the company's operations.

Despite this, Amazon's forward P/E ratio of 25 suggests the stock is still attractively valued. The third-quarter report is expected to be another strong one, driven primarily by AWS, making Amazon's stock a potential buy before October 29, 2024. However, investors should keep a long-term perspective, as significant returns may not materialize until 5-to-10 years down the line.