History Suggests Now Could Be a Smart Time to Buy Amazon Stock

Core Viewpoint - Amazon's stock is currently down over 20% from its previous high, presenting a potential buying opportunity for long-term investors based on historical trends [1][2]. Historical Performance - Amazon's shares have experienced 21 bear markets since its IPO in May 1997, averaging a 20% decline approximately every 16 months [2]. - Some sell-offs have been brief, such as the one in February 2020, where the stock recovered its previous high in less than two months [3]. - Other declines, like during the dot-com bubble burst, saw Amazon take nearly nine years to recover [4]. - Historically, every pullback has been a great buying opportunity; for instance, a $10,000 investment during a significant drop in December 1999 would be worth nearly$340,000 today [5]. Valuation Insights - Amazon is currently trading at a historically low valuation, with shares below 33 times trailing 12-month earnings, a level last seen during the 2008 market meltdown [6][7]. - If an investor had purchased $10,000 in Amazon stock when its valuation was last this low, it would be worth over$760,000 now [8]. - The forward price-to-earnings ratio is even lower at 27.55, indicating strong expected earnings growth [9]. Future Outlook - Amazon is a different company now compared to its previous declines, particularly with the cloud segment being a more established market [10]. - Despite this, historical performance suggests that the stock's low valuation should not be overlooked, and while returns may not match past highs, the stock is expected to remain a strong performer [11]. - The adoption of artificial intelligence is anticipated to drive sustained growth in cloud services, alongside expansions in e-commerce and other initiatives like healthcare and satellite broadband [12].