Why Amazon Stock Could Surge 31% in the Next 12 Months

Amazon (NASDAQ:AMZN) stock has faced challenges this year, struggling to gain momentum despite strong financial results. Concerns over market uncertainties, potential trade policy shifts, and a lack of investor confidence have weighed on the stock. However, Wall Street analysts remain bullish, with a target price of $268.18, suggesting that Amazon stock could increase by 31% in the next 12 months. Let’s explore the three key reasons why Amazon stock may see a significant rebound.

1. E-Commerce Growth Fuels Amazon’s Long-Term Prospects

Amazon’s e-commerce business remains a dominant force, showing resilience even amid broader market challenges. One of the biggest drivers of Amazon’s growth is its commitment to improving delivery times, which helps increase sales and boost its Prime membership base. Amazon’s focus on operational efficiency, such as regionalizing U.S. fulfillment operations and optimizing last-mile delivery, has led to reduced per-unit costs while maintaining a quick delivery pace.

Additionally, Amazon’s recent innovation, Amazon Haul, is poised to capture a broader audience by offering ultra-low-priced products in one easy-to-shop destination. This strategy will help Amazon expand its customer base and strengthen its position as the leader in online retail.

As the e-commerce sector continues to grow, Amazon is positioned to maintain a strong market presence. The company’s expanded product offerings, enhanced inventory placement, and investments in automation are expected to lead to higher sales, better margins, and further market dominance.

2. Amazon’s Advertising Division Continues to Gain Momentum

Amazon’s advertising segment is one of the company’s fastest-growing revenue streams. In Q4 2024, Amazon’s ad business generated $17.3 billion, an 18% increase year-over-year. Amazon’s advertising division is now on track for annual revenue of $69 billion, more than double the $29 billion it posted just four years ago.

A significant contributor to this growth is Amazon’s sponsored products, which remain the largest revenue driver within the advertising division. Additionally, Amazon is seeing promising growth in its streaming services, particularly through its Prime Video advertising business. With room for expansion, the advertising division is expected to continue to be a key growth driver for Amazon over the next few years.

3. AWS Remains a Key Profitability Driver for Amazon

Amazon Web Services (AWS), the company’s cloud computing platform, continues to drive substantial profits. In Q4 2024, AWS generated $28.8 billion in revenue, marking an 18.9% increase year-over-year. AWS accounted for more than 58% of Amazon’s overall operating income in 2024, underlining its importance to the company’s bottom line.

The continued shift towards cloud-based solutions and the growing demand for generative artificial intelligence (AI) workloads are expected to accelerate AWS’s expansion. Amazon’s focus on enhancing operational efficiency within AWS will further solidify its profitability, ensuring that it remains a critical driver of long-term growth.

Final Thoughts: A Strong Investment Opportunity

Amazon stock offers a compelling investment opportunity, driven by its robust e-commerce business, rapidly expanding advertising division, and dominant AWS unit. As these three high-growth segments continue to gain momentum, Amazon is well-positioned to see a significant surge in stock value. With analysts predicting a 31% upside potential, Amazon stock remains a top pick for investors seeking growth opportunities in the tech sector.

As Amazon continues to innovate and scale its operations, the company is poised to benefit from these growing markets, making a 31% increase in stock price within the next 12 months a realistic expectation. Investors looking to capitalize on Amazon’s growth should consider the stock as a strong buy.

Final Thoughts: A Strong Investment Opportunity

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Stephanie Bédard-Châteauneuf

About the author: Stephanie Bédard-Châteauneuf has over seven years of experience writing financial content for various websites. Over the years, Stephanie has covered various industries, with a primary focus on tech stocks, consumer stocks, market news, and personal finance. She has an MBA in finance.