Amazon Stock: Buy, Sell, or Hold?

Published: Sunday, April 26, 2026 at 1:46 pm

Amazon Stock: Navigating the Current Market

Amazon (AMZN) shares have experienced a significant surge recently, climbing approximately 14% year-to-date and nearly 25% in the last month. This positive momentum comes as the company prepares to release its first-quarter results on Wednesday, April 29, after market close. Investors are keenly watching to see if the company's growth can justify the stock's current valuation, which is near its 52-week high.

The company's fourth-quarter results provided investors with reasons for optimism. Net sales increased by 14% year-over-year, reaching $213.4 billion. A key driver of this growth was Amazon Web Services (AWS), with sales rising 24% to $35.6 billion. AWS's growth rate was the fastest in 13 quarters, highlighting its importance as a high-margin segment. In the previous year, AWS generated $45.6 billion in operating income on $128.7 billion in sales, accounting for 57% of Amazon's operating income despite representing only 18% of net sales. Management anticipates continued growth in AWS as companies increasingly adopt cloud services and AI applications.

However, this growth comes with substantial investment. Amazon expects capital expenditures to reach approximately $200 billion by 2026, driven by demand for existing offerings, AI, chips, robotics, and low-earth orbit satellites. This investment is occurring despite a decline in free cash flow, which fell to $11.2 billion for the trailing 12 months ending December 31, 2025, down from $38.2 billion in the prior year. This decrease was primarily due to increased spending on property and equipment, particularly investments in AI.

For the first quarter, Amazon's guidance projects net sales between $173.5 billion and $178.5 billion, representing approximately 13% growth at the midpoint. However, the company anticipates that investments will impact profitability, with modest growth expected in operating income.

BNN's Perspective:

Amazon's current situation presents a complex picture. While the company's underlying business, particularly AWS, demonstrates strong performance and long-term potential, the stock's valuation appears to reflect much of this optimism. The significant capital expenditures planned for the coming years raise concerns about short-term profitability. Given the current price-to-earnings ratio, a "hold" rating seems appropriate, as the company's long-term advantages and the potential of AWS warrant continued observation, but the current valuation may not justify a new investment.

Keywords: Amazon, AMZN, AWS, Amazon Web Services, Stock, Earnings, Q1, Quarterly Results, Sales Growth, Capital Expenditures, AI, Cloud Computing, Investment, Valuation, Hold, Buy, Sell

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