Could buying Amazon stock today set you up for life?

In general, it is wise for investors to opt for the slow and steady road to wealth. It’s easier to get on base than to hit a home run, and consistent success can create magical financial results if you give it time. But that doesn’t mean you can’t aim for the stars occasionally; the right stock can set you up for life.

Sometimes it’s better to be lucky than good.

Amazon (AMZN -3.06%) is undoubtedly the most famous example. If you had invested just $1,000 in stocks in the late 1990s, you would have over $1.8 million today.

The company is now a whopper, worth nearly $2 trillion. It’s no longer the lottery ticket stock it once was, but don’t underestimate its ability to create life-changing wealth for long-term investors. Here’s why Amazon can still make you generationally rich.

The Amazon Prime Ecosystem

Amazon’s roots are in e-commerce, where its Prime membership became famous. There are approximately 167 million Prime subscribers in the United States. With an estimated total of 129 million households in America, it’s safe to say that the majority of people who shop online subscribe to Prime. After all, Amazon dominates online shopping in the US with about 40% market share.

Prime started with e-commerce perks like free shipping, but membership expanded as Amazon grew its business. Today, Amazon is in several consumer-facing business segments, including media, streaming and healthcare. The more value Amazon adds to Prime, the stickier it becomes to customers and the more Amazon can charge for it. It helps Amazon grow new products or services and generates about $40 billion in recurring revenue at its size today.

Amazon has turned to live sports to bolster its advertising business, acquiring rights to broadcast National Basketball Association and National Women’s Basketball Association games starting in 2025. This is in addition to Amazon’s existing rights to the National Football League. Live sports are a huge draw, bolstering Prime’s appeal. I wouldn’t be surprised to see Amazon continue to expand Prime into new industries.

Years of cloud growth left

It’s hard to discuss Amazon without talking about Amazon Web Services, the cloud platform it launched in 2006 and has grown to become its main source of profit. Amazon won in e-commerce because it consolidated its retail business model and used its massive size to offer superior service and prices. Cloud works similarly. Amazon has assembled an enormous computing system housed in data centers. They rent their computing capacity to customers, providing better performance for less money than it would cost companies to build and maintain them.

But there are millions of companies around the world, so large-scale cloud migration takes time. That’s why AWS and other cloud platforms have been growing for over a decade and it’s not over yet. Mordor Intelligence estimates that the global cloud computing market was worth $587 billion last year and will grow by an average of 16.5% to reach $2.29 trillion in 2032.

Amazon is the global leader with an estimated 31% market share, so it will directly benefit as the total “pie” grows. A mid-teens growth rate is impressive, so barring a collapse, I don’t see why the cloud can’t grow comfortably for at least another decade. Artificial intelligence (AI) can bring more advantages than currently known.

Putting that into numbers

Up to this point, we’ve highlighted Amazon’s growing core businesses and the potential addition of emerging opportunities within Prime. Time to put some numbers on it.

Today, analysts predict that Amazon will grow revenue by an average of nearly 28% annually over the next three to five years. For the record, the stock is trading at 38 times Amazon’s estimated 2024 earnings. If Amazon comes close to those estimates, it’s hard not to like the stock at this price.

It only gets better if you plan to hold the stock for a long time (five years or more), as growth trends like e-commerce and cloud look set to grow well beyond the next five years, which means Amazon should accept. strong earnings growth for years to come. A business that grows revenue by nearly 30% annually is unlikely to fall off a cliff. We could see earnings growth slowing over the years due to the large size of the company, but it should still create great investment results over the long term given today’s high growth rate.

Amazon is a world-class company, and its constant drive to expand and grow has created a behemoth that can still help investors prepare for life in the next decade and beyond.