3 Reasons to Buy Amazon Stock Like There's No Tomorrow

Numerous tech stocks got a boost over the past year, thanks to the fervor around artificial intelligence (AI). E-commerce giant Amazon (NASDAQ: AMZN) was no exception.

Amazon's stock rose from a 52-week low of $118.35 last year to a high of $201.20 in July. But its stock's resurgence wasn't entirely dependent on AI.

Several reasons exist to invest in the e-commerce heavyweight, in addition to its AI ambitions. And now, its share price has dropped along with the broader stock market's recent decline, creating an opportunity to purchase shares well below their 52-week high.

Here are three factors that make Amazon an outstanding stock to buy and hold for the long run.

Amazon's sharing its supply chain mastery

In its path to becoming a dominant player in the e-commerce industry, Amazon needed to construct impressive infrastructure to achieve its supply chain goals, such as fast shipping speeds. For example, the company uses AI to manage an army of over 700,000 robots in its warehouses to process customer orders around the clock.

Recognizing that this is no small feat for businesses to achieve, Amazon decided to transform its e-commerce infrastructure from a cost-of-doing business model to an income generator. Last fall, it launched Supply Chain by Amazon, offering its various logistics capabilities to third-party retailers.

According to CEO Andy Jassy, "That collective set of businesses is growing very significantly." Actually, the company spent years cultivating its revenue from third-party sellers. Now, it's a significant part of Amazon's income.

Since Mr. Jassy became CEO in 2021, Amazon's fees collected through third-party seller services grew from 2021's $103.4 billion to 2023's $140.1 billion. In Q2, this part of Amazon's business accounted for nearly a quarter of its $148 billion in revenue.

Amazon's digital advertising dominance

Amazon is one of the most-visited websites in the world. Its consumer base offers an enormous audience for advertisers to reach, propelling the growth of the company's advertising business.

Today, Amazon is ranked third in the world in terms of digital advertising market share. Consequently, the company generated $12.8 billion in Q2 ad revenue, a 20% year-over-year increase.

Its ad business is poised to grow further. The company began selling ads on its Amazon Prime Video service this year. The service has a sizable viewership, which is desirable to advertisers, considering Amazon's market share is among the biggest in the video streaming industry and rivals Netflix .

In addition, ad sales are helping Amazon's bottom line. According to CFO Brian Olsavsky, "Advertising remains an important contributor to profitability in the North America and international segments."

Amazon's other bets

To expand its business further, Amazon is taking the bold step of delivering internet to the billions of people around the globe who lack reliable broadband access. The company is doing this by launching satellites into orbit through which consumers can get online. Its test launches last year were successful, and it plans to begin deploying satellites later this year.

Amazon also ventured into the multitrillion-dollar healthcare business. It bought the digital healthcare platform One Medical last year and launched a subscription service for prescription medication in 2023. It expanded the program to Medicare members this year.

Many other reasons exist to buy Amazon stock like there's no tomorrow. For instance, the company's AI capabilities are off to a strong start. Mr. Jassy stated, "Our AI business continues to grow dramatically with a multibillion-dollar revenue run rate despite it being such early days."

AI helped the company's Amazon Web Services (AWS) division, which provides businesses with IT infrastructure, such as cloud computing , to grow Q2 net sales by 19% year over year to $26.3 billion.

The company is taking its AI efforts to the next level by producing its own AI-optimized semiconductor chips. According to Mr. Jassy, "demand for our custom silicon, training, and inference is quite high, given its favorable price performance benefits relative to available alternatives."

On top of that, Amazon is investing in these other businesses while improving its financials. Not only did its Q2 net sales grow 10% year over year to $148 billion, its Q2 net income reached $13.5 billion, double the $6.7 billion achieved in the prior year.

This led to Amazon's diluted earnings per share (EPS) increasing to $1.26 in Q2, compared to $0.65 in 2023. Meanwhile, its free cash flow (FCF) over the trailing 12 months rose from $7.9 billion in Q2 of 2023 to $53 billion this year.

Amazon's stock is well off its 52-week high at the time of this writing, so now is a good time to pick up some shares. Wall Street analysts agree. Their current consensus is a buy rating, with a median share-price target of $220 for Amazon stock.

The company's many opportunities to grow its business -- especially in massive markets such as healthcare and AI -- make Amazon an attractive long-term investment .

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Robert Izquierdo has positions in Amazon. The Motley Fool has positions in and recommends Amazon and Netflix. The Motley Fool has a disclosure policy .