After struggling through a difficult year in 2022 — perhaps “difficult” is putting it lightly, as its share price was cut in half — Amazon.com Inc. (ticker: AMZN) stock has been on a vicious rally in the two years since. In the two years ending Dec. 30, 2024, AMZN stock surged a meteoric 163.5%, more than triple the S&P 500’s 53.8% return over the same period.
Long-term Amazon investors have come to expect outperformance over the past 20 years. Since 2004, Amazon’s market capitalization has skyrocketed from tens of billions of dollars to more than $2.3 trillion, making Amazon one of the most valuable companies in the entire market.
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Shares of the leading online marketplace and cloud services provider hit fresh all-time highs in 2024, further vindicating patient long-term investors in the company.
Amazon’s 20-Year Journey
Amazon was founded as an online bookstore by Jeff Bezos back in 1994, but the company has made several major pivots throughout its history. The company went public at a valuation of $300 million in 1997.
By 2003, Amazon had expanded its online marketplace beyond books to music, clothing and other goods sold by third parties.
Amazon launched its Amazon Prime loyalty program in 2005 — a membership that cost $79 annually and included free two-day shipping on any Amazon order. Prime has been a tremendous success for Amazon over the past 20 years, and there are now more than 200 million global Prime members. Since then, Amazon has been able to ratchet up its membership fees; a Prime membership now costs $139 annually or $14.99 per month.
In 2006, Amazon rolled out Amazon Unbox, a subscription video streaming and rental service later rebranded as Prime Video.
The following year, the company launched its Kindle electronic reading device, and in 2008 it acquired leading audiobooks company Audible.
In 2014, Amazon acquired video game streaming platform Twitch and launched the Amazon Echo smart speaker featuring its Alexa virtual assistant.
Amazon has also expanded beyond the digital world. The company opened its first physical store in 2015 and acquired grocery chain Whole Foods in 2017.
In 2015, Amazon even started its own annual shopping holiday, Amazon Prime Day.
Amazon has achieved remarkable success over the years despite some misses along the way. The company released its Fire phone in 2014, but it discontinued the project a year later after the Fire flopped.
The biggest move Amazon made in the past 20 years was the launch of its Amazon Web Services cloud computing business back in 2006. In the nearly two decades since, AWS has been one of Amazon’s largest growth drivers. In the third quarter of 2024, AWS alone brought in $27.45 billion in revenue, representing a run rate of about $110 billion annually.
Amazon founder Jeff Bezos resigned as Amazon’s CEO in July 2021 and was replaced by AWS chief executive Andy Jassy. The new CEO’s tenure got off to a rocky start, with the stock tumbling 35.3% during his first 12 months at the helm.
Aggressive Federal Reserve interest rate hikes in 2022 triggered a sell-off in tech stocks, and Amazon’s 49.4% decline in 2022 was its worst performance of any calendar year in the past two decades. Despite the broad market weakness, Amazon opted to execute a 20-for-1 stock split in 2022, its only stock split in the past 20 years.
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Amazon Performance
Amazon’s evolution and innovation have helped the company grow its revenue by almost a hundredfold over the past two decades. Analysts expect full-year 2024 revenue of more than $637 billion, a figure 92 times greater than its 2004 revenue of $6.92 billion.
However, its heavy investments in growth initiatives have sometimes weighed on Amazon’s profitability along the way, even in recent years. In fact, Amazon reported a $2.7 billion net loss in 2022, which included an unrealized $12.7 billion loss on its 20% stake in electric vehicle maker Rivian Automotive Inc. (RIVN). This willingness to delay short-term gratification in the form of sacrificing profits has, however, resulted in incredible long-term performance. By giving up margins early and taking big risks, Amazon has captured a huge market share and hit several home runs.
Amazon’s ability to ace the “marshmallow test” becomes evident when looking at its long-term returns.
Over the past 20 years through Dec. 30, 2024, Amazon shares have generated a total return of 9,736% compared to a 387% total return for the S&P 500 during that stretch. Those gains translate to a 25.8% compound annual growth rate for Amazon compared to an 8.2% CAGR for the S&P 500 in that time.
As a result, $10,000 in AMZN stock purchased 20 years ago would now be worth $983,555. A $10,000 investment in the S&P 500 over the same period, however, would amount to $48,675.
Analyst Outlook
Even after those extremely impressive long-term returns, many Wall Street analysts remain bullish on Amazon’s outlook. Among the 67 analysts covering the stock, Amazon has 63 “buy” or “strong buy” analyst ratings, and just four “hold” or “sell” ratings. The average analyst price target for AMZN stock is $240.39, suggesting 8.6% upside from its Dec. 30 closing price over the next 12 months.
CFRA Research analyst Arun Sundaram is also bullish on the stock. “We expect significant profit, margin, and free cash flow growth over the coming years as AMZN expands higher-margin revenue streams,” Sundaram said in a December research note. He rates the stock a “buy” and assigns a $238 price target for shares, representing 7.5% upside from its Dec. 30 closing price.
Of course, after AMZN’s rapid price surge in 2024, not all analysts see as much opportunity in shares as they once did. Morningstar’s Dan Romanoff, for example, gives the stock a two-star rating and a fair value estimate of $200 per share, representing nearly 10% downside from its current price. As for the underlying business, however, Romanoff is effusive with his praise.
“From a retail perspective, we expect continued innovation to help drive further share gains in a post-lockdown world. We also look for continued penetration into categories such as groceries and luxury goods that have not previously translated into the same level of success as other retail categories,” Romanoff said in a note earlier this year.
“AWS and advertising growth should continue to outpace e-commerce growth and should be the main growth drivers over the next five years,” Romanoff said.
As always, investors should do their own research and triangulate different market perspectives to develop their own outlook on shares. While long-term shareholders have been amply rewarded, it’s unlikely returns over the next 20 years will be quite as strong. The stock doesn’t have the compelling entry point that it did a year or two ago, but new investors will still be buying into a strong company with no end in sight to its dominance in online retail and cloud computing.
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How Much Would $10,000 Invested in Amazon Stock 20 Years Ago Be Worth Today? originally appeared on usnews.com
Update 12/31/24: This story was previously published at an earlier date and has been updated with new information.
