Amazon Stock Is Down 28%. Should You Buy the Dip Before May 1?

Core Viewpoint - President Trump's announcement of tariffs on imported goods poses a significant risk to Amazon's profit margins, as the company sources products globally and may face higher costs [1][11]. Group 1: Impact of Tariffs - Amazon's e-commerce segment is likely to be adversely affected by tariffs, which could increase costs by at least 10% for all imported products, with some from China potentially rising by 245% [11]. - The company's stock has declined by 28% from its recent all-time high, reflecting investor concerns over the impact of tariffs [3][15]. Group 2: Amazon Web Services (AWS) - AWS, which primarily sells digital services, is not directly impacted by traditional tariffs, providing a buffer for Amazon's overall profitability [2]. - AWS generated a record $107.5 billion in revenue during 2024, accounting for over half of Amazon's operating income of $68.6 billion, despite representing only 16.8% of total revenue [7]. - The platform's quarterly revenue growth remained steady at 19%, and there is anticipation for continued momentum in Q1 2025, particularly from its growing AI services portfolio [8]. Group 3: Earnings and Valuation - Wall Street estimates suggest Amazon could achieve $1.36 in earnings per share (EPS) for Q1, a 38.7% increase year-over-year, supported by AWS and other segments not affected by tariffs [13]. - Following the recent stock dip, Amazon's price-to-earnings (P/E) ratio is now at 31.1, significantly lower than its five-year average of 83, presenting a potential buying opportunity for investors [15]. - Projections for 2026 indicate an expected EPS of $7.52, suggesting a forward P/E ratio of 22.9, which would require a 35.8% stock price increase to maintain the current P/E ratio [16]. Group 4: Long-term Outlook - Amazon's historical performance shows a remarkable 191,000% increase in stock value since its IPO in 1997, indicating strong long-term growth potential regardless of short-term fluctuations [19]. - The current valuation presents a compelling reason for long-term investment in Amazon stock, independent of the upcoming Q1 report [18].