Amazon Stock: Why It Trades at Just 21.3x Forward Earnings

Amazon's stock price may seem puzzling to investors given its impressive growth and opportunities. Despite increasing sales by 37.5% year-over-year in the second quarter, Amazon trades at a relatively low multiple of 21.3 times forward earnings.

This is lower than the S&P 500 average of 20.4 times forward earnings. However, CEO Andy Jassy believes that this is because investors view Amazon as a mature company with limited growth potential.

Amazon's cloud segment, AWS, continues to drive growth, increasing sales by more than 37% year-over-year in the second quarter. This was the highest growth rate in 18 quarters and was driven by AI development on the platform.

Additionally, Amazon has signed multi-year commitments with companies like Anthropic and OpenAI for its Graviton5 chip business. The company's e-commerce business is still growing by double digits, with 80 new U.S. cities added to its ultra-fast delivery service in the second quarter.