The bull market continues to grow. 3 Reasons to Buy Amazon Like There’s No Tomorrow

For those new to investing, a bull market is generally a sustained period of growth lasting several months or sometimes years. It officially starts when stock prices rise 20% from a recent low.

The chart below shows S&P 500 it hit its lowest point in October 2022 and has risen steadily since then, fueling a rising market.

Data by YCharts

The S&P 500 is up about 55% since October 2022 on easing inflation and the rise of artificial intelligence (AI). The index has seen a solid recovery and is probably not done yet. Earnings season kicked off this month, proving that tech companies are starting to enjoy major returns from their AI investments.

As a result, it’s probably not too late to take advantage of the bull market. Amazon (AMZN 0.52%) is an attractive option, with its shares slightly outperforming the S&P 500 since the start of the bull market, up 57%. The company hosts a strong business with growth catalysts across technology.

So get in while the bull market is still rising. Here are three reasons to buy Amazon stock like there’s no tomorrow.

1. Improving its entire business with AI

Interest in artificial intelligence has grown since the beginning of last year, prompting countless tech companies to restructure their businesses to prioritize the industry. Cloud computing has become a crucial growth area for AI, with many companies turning to the best cloud platforms to integrate the technology into their workflows.

Amazon Web Services (AWS) has a 31% market share in cloud computing and has invested heavily in AI. Since early 2023, Amazon has added a range of new AI tools to AWS and expanded the reach of the platform by sinking billions into opening data centers at home and abroad. According to a March Bloomberg report, Amazon plans to spend nearly $150 billion over the next 15 years on data centers as it expects an explosion in demand for cloud AI services.

In addition to AWS, Amazon is enhancing other areas of its business with generative functions. Earlier this year, the company launched its AI assistant, Rufus, designed to improve the experience of shoppers on its e-commerce site. Meanwhile, AI helps the company better track shopping trends, recommend products, and handle shipping/warehouse logistics.

2. A breakthrough in digital advertising

Amazon’s success over the years is primarily due to consistent reinvestment in its business, which has seen it expand into multiple markets. In addition to online retail and AWS, the company has strong positions in food, video streaming, gaming, healthcare and more. The company is careful to keep up with current technology trends, which recently led it to expand its role in the $740 billion digital advertising market.

The high costs of content production and running a demanding video streaming site have seen many companies struggle to break even in the space. As a result, more entertainment firms have turned to advertising to increase revenue. Netflix, Disneyand Comcast have all launched ad-supported tiers on their respective streaming platforms in the past year, partnering with advertising leaders such as Alphabet and Microsoft.

Amazon also joined in this year, introducing ads to its Prime Video streaming service. The move quickly paid off, diversifying his revenue streams and exposing him to another high-growth sector. Ad revenue grew 20% in the second quarter of 2024, boosted by Prime Video ads.

Prime Video reached over 200 million subscribers this year, accounting for 22% of the streaming market (tied with Netflix in market share). Amazon’s vast user base is a great tool for attracting advertisers, allowing it to further expand its digital ad revenue and potentially charge a premium for its services.

3. Amazon’s stock is a bargain compared to its potential

Amazon shares are up 33% year-to-date, outpacing the S&P 500’s 28% gain. The company has rallied investors with impressive earnings, an expanding role in AI and unexpected growth in digital advertising.

Meanwhile, the chart below suggests that Amazon is a bargain compared to its growth prospects.

Data by YCharts

Amazon’s price-to-earnings (P/E) ratio is high at 42. However, this figure is significantly lower than its 10-year average, during which the company’s stock price has increased by 958%. Meanwhile, Amazon’s price-to-sales (P/S) ratio sits at an attractive three and is similarly below its 10-year average.

In addition to an exciting prospect in artificial intelligence and a budding advertising business, Amazon stock is a great way to take advantage of the current bull market.