Amazon's Undervalued Stock Shines Amid Cloud Computing Dominance

Amazon's stock has underperformed in recent months, but its dominance in cloud computing and online retail makes it an intriguing investment opportunity.

The company's shares have gained only 2.5% over the last three months through July 31, trailing the S&P 500 index's 3.9% gain and the S&P 500 Growth index's 4.2% increase.

However, Amazon's cloud-computing business, Amazon Web Services (AWS), has been a major contributor to the company's profit growth. With a leading market share of 28% in the fast-growing cloud-computing space, AWS continues to expand its sales rapidly, with a 36.8% year-over-year gain in the second quarter.

Despite management's increased spending plan, including a projected $220 billion in capital expenditures this year, Amazon's stock trades at an attractive valuation compared to the S&P 500's price-to-earnings (P/E) ratio of 29. The company's P/E ratio has dropped from 35 to 22 over the last year, making it a compelling buying opportunity for long-term investors.