Amazon.com (NASDAQ:AMZN) stock experienced a decline of over 3% on Monday, March 3rd, amidst a broader Wall Street downturn. This sell-off was triggered by President Trump’s tariff confirmation, which resulted in the Dow Jones falling 1.8% and the S&P 500 dropping 2.1%, marking its worst day of the year to date.
At its current levels of $205, AMZN stock looks attractive but volatile – making it a tricky pick to buy. We believe there is minimal cause for concern with AMZN stock, which makes it attractive but highly sensitive to adverse events as its current valuation is very high.
We arrive at our conclusion by comparing the current valuation of AMZN stock with its operating performance over the recent years as well as its current and historical financial condition. Our analysis of Amazon.com along key parameters of Growth, Profitability, Financial Stability, and Downturn Resilience shows that the company has a very strong operating performance and financial condition, as detailed below.
How does Amazon.com’s valuation look vs. the S&P 500?
Going by what you pay per dollar of sales or profit, AMZN stock looks expensive compared to the broader market.
• Amazon.com has a price-to-sales (P/S) ratio of 4.0 vs. a figure of 3.1 for the S&P 500
• Additionally, the company’s price-to-operating income (P/EBIT) ratio is 41.4 compared to 24.4 for S&P 500
• And, it has a price-to-earnings (P/E) ratio of 22.3 vs. the benchmark’s 24.4
How have Amazon.com’s revenues grown over recent years?
Amazon.com’s Revenues have seen notable growth over recent years.
• Amazon.com has seen its top line grow at an average rate of 14.3% over the last 3 years (vs. 9.8% for S&P 500)
• Its revenues have grown 11.9% from $554 Bil to $620 Bil in the last 12 months (vs. change of 5.6% for S&P 500)
• Also, its quarterly revenues grew 11.0% to $159 Bil in the most recent quarter from $143 Bil a year ago (vs. 7.2% change for S&P 500)
How profitable is Amazon.com?
Amazon.com’s profit margins are around the median level for companies in the Trefis coverage universe.
• Amazon.com’s Operating Income over the last four quarters was $61 Bil, which represents a moderate Operating Margin of 9.8% (vs. 12.6% for S&P 500)
• Amazon.com’s Operating Cash Flow (OCF) over this period was $113 Bil, pointing to a moderate OCF-to-Sales Ratio of 18.2% (vs. 14.4% for S&P 500)
Does Amazon.com look financially stable?
Amazon.com’s balance sheet looks strong.
• Amazon.com’s Debt figure was $135 Bil at the end of the most recent quarter, while its market capitalization is $2.2 Tril (as of 3/3/2025). This implies a strong Debt-to-Equity Ratio of 5.4% (vs. 19.7% for S&P 500). [Note: A lower Debt-to-Equity Ratio is desirable]
• Cash (including cash equivalents) makes up $101 Bil of the $625 Bil in Total Assets for Amazon.com. This yields a strong Cash-to-Assets Ratio of 15.1% (vs. 14.1% for S&P 500)
How resilient is AMZN stock during a downturn?
AMZN stock has been more resilient than the benchmark S&P 500 index during some of the recent downturns. Worried about the impact of a market crash on AMZN stock? Our dashboard How Low Can Stocks Go During A Market Crash captures how key stocks fared during and after the last six market crashes.
Inflation Shock (2022)
• AMZN stock fell 52.0% from a high of $170.40 on 3 January 2022 to $81.82 on 28 December 2022, vs. a peak-to-trough decline of 25.4% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 2 February 2024
• Since then, the stock has increased to a high of $242.06 on 4 February 2025 and currently trades at around $205
Covid Pandemic (2020)
• AMZN stock fell 22.7% from a high of $108.51 on 19 February 2020 to $83.83 on 12 March 2020, vs. a peak-to-trough decline of 33.9% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 14 April 2020
Global Financial Crisis (2008)
• AMZN stock fell 65.3% from a high of $5.04 on 23 October 2007 to $1.75 on 20 November 2008, vs. a peak-to-trough decline of 56.8% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 23 October 2009
Putting all the pieces together: What it means for AMZN stock
In summary, Amazon.com’s performance across the parameters detailed above are as follows:
• Growth: Very Strong
• Profitability: Neutral
• Financial Stability: Very Strong
• Downturn Resilience: Strong
• Overall: Strong
Hence, despite its very high valuation, the stock appears attractive but volatile, which supports our conclusion that AMZN is a tricky stock to buy.
Not too happy about the volatile nature of AMZN stock? The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming the S&P 500 over the last 4-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics.
Invest with Trefis
Market Beating Portfolios | Rules-Based Wealth
Read the full article here
