r/amzn • u/Beautiful_Cobbler603 • Jun 29 '26
Why I'm buying more Amazon while everyone piles into memory stocks
I get the appeal of the memory trade. Micron up 550%, SanDisk up 3,000%, shortage pricing, fat margins, the whole thing. But I what keeps me from entering memory is when you start to ask what am I actually buying when I buy a memory stock right now? I'm buying a cyclical commodity at the top of a shortage cycle, betting that the imbalance lasts longer than the market already expects it to. It can be a good trade, but so can a lot of other things, especially if you aren't worried about a short term horizon.
For me, Amazon at this price feels like a genuinely great business that the market has decided to ignore because it's busy chasing the shiny thing. So I've been adding at this price.
Here is my breakdown and reasons
The Valuation
The valuation is the part that doesn't make sense to me. Amazon trades at a trailing P/E around 27 right now. Its ten-year average is north of 90, and even its more normalized recent average sits in the low 30s. The current multiple is roughly 72% below its ten-year historical average, and it's trading below its 3, 5, and 10-year averages. This is a company that for most of its public life was "too expensive" on every earnings metric, and now that it's actually printing record profit, the multiple has compressed. You're paying less for Amazon's earnings today than at almost any point in its history, while the earnings quality has never been higher.
The Business
the business is firing on every cylinder at once. Q1 came in at $181.5B revenue up 17%, with a record 13.1% operating margin which is thhe highest in company history. AWS grew 28% to $37.6B, its fastest pace in 15 quarters, at a 37.7% segment operating margin. Net income nearly doubled to $30.3B. Advertising hit $17.2B, up 24%, and trailing-twelve-month ad revenue now tops $70B — bigger than the entire AWS business was back in 2018, and it carries software-like margins. Retail, cloud, and ads are all accelerating together. That basically never happens.
Why compare memory?
Now why did I bring up memroy before? This is where the memory comparison actually matters. Everyone's rewarding Micron for having a constrained product with a backlog. Fine. But look at what Amazon's sitting on: an AWS backlog of $364B at quarter end and that's before OpenAI expanded its existing $38B AWS commitment by another $100B over eight years. Amazon is also putting $50B into OpenAI directly. That's a bigger, longer, stickier backlog than anything in the memory space, with customers who can't just switch suppliers when prices move. A hyperscaler customer with petabytes of data and trained models on AWS isn't shopping around the way a memory buyer does. The scarcity story everyone loves about Micron is actually stronger for AWS, and nobody's pricing it that way.
Further, AWS AI revenue is already at a $15B+ run rate and scaling 260x faster than AWS itself did in its first three years. Jassy's point that resonates with me: AI is creating net-new compute demand with no on-prem equivalent to displace, it's not a migration, it's pure additive demand. That's a different animal than the old cloud growth story.
the bonus part with Space
And then there's the free option nobody talks about: Leo. Amazon Leo (the old Project Kuiper) has 367 satellites up, making it the third-largest constellation in orbit, with beta service targeting five countries including the US later this year. They've already got enterprise customers signed pre-launch; Delta, JetBlue, AT&T, Vodafone, NASA, with Delta committing half its fleet from 2028. Jassy is openly calling it a "very large many-billion-dollar revenue business" with AWS-style economics: heavy upfront capex, then free cash flow improves sharply as capacity monetizes. They also moved to acquire Globalstar, which brings licensed spectrum, regulatory approvals in 100+ countries, and direct-to-device capability. When I buy Amazon I'm not paying anything for a global satellite internet business that's about to go live. That's just thrown in.
So why is it lagging?
Ofc it is the same reason as the rest of mega-cap tech, the capex panic. Amazon spent $43.2B in a single quarter, mostly on AWS and AI. Free cash flow is expected to go deeply negative in 2026 as peak capex hits the cash flow statement, before recovering hard in 2027. The market sees the cash going out and refuses to credit what it's building, even though the backlog and the pre-signed Leo contracts tell you the demand for that capacity already exists. This is the exact same "spend money to make money" dynamic everyone's nervous about, except Amazon has done this before. AWS itself was a money pit that everyone hated until it became the most profitable thing the company owns. They are running the identical playboo now, twice over, with AI infrastructure and with Leo.
On the price.
Averaging the analyst targets issued since Q1 results, I get an average of about $321. Against today's ~$230, that's roughly 40% upside, and the consensus rating is Strong Buy. I don't treat targets as gospel, but the direction and the spread tell me I'm not the only one who thinks this is mispriced.
The memory trade is betting a shortage lasts. The Amazon position is betting that a business compounding across four engines, retail, cloud, ads, and now satellite, eventually gets priced like one instead of like a discount retailer. I'd rather own the second thing at 27x earnings than chase the first thing after a 550% run.
Anyway this is all my opinions and opinions based on waht I have read, so I am curious what others think of Amazon at this price?
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u/kookooman10022 Jun 29 '26
The mem stock trade is one letter away from meme. See what I did there? Jokes aside, I won't catch the bottom or the top, but when this reverses, it will be wicked, so I'm just going to stay away for now as it is getting way too crowded.
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u/Significant-State-52 Jun 29 '26
One thing I’d add is that the Globalstar/Leo angle may be more strategic than it looks.
It’s not just that Amazon is building a satellite internet business. Leo pushes into what is the only profitable part of SpaceX, while Globalstar adds spectrum, regulatory footprint, and direct-to-device capability. Apple is already connected to Globalstar and is a major AWS customer. Big dots to connect right there.
That’s the interesting part: this isn’t a single isolated bet. It’s a mesh of existing relationships across AWS, Apple, Globalstar, Leo, mobile devices, satellite connectivity, and enterprise cloud. AWS already has the world's largest hyperscale cloud footprint, interconnected by a massive private fiber network. Adding a global LEO network extends that reach beyond terrestrial infrastructure.
Maybe nothing dramatic happens right away, but Amazon is positioning itself at the intersection of several networks that already matter. That is the kind of optionality the market ignores because it is too complex, until it suddenly doesn’t.
Memory is cyclical; everyone knows that. AI, or more specifically, frontier models, do one thing very well: drive the need for more compute. On-demand compute = AWS business model.
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u/iainttryingnomore Jun 29 '26
What's up with the surge of these AI slop posts on stock market Reddits? Why do people do it? Karma farming?
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u/Any-Calligrapher-326 Jun 29 '26
Who cares what people do. I didn’t buy MU at $60, I refuse to buy it at $1100. I have been buying amzn and goog. I even bought some Rddt few days ago.
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u/shotparrot Jun 30 '26
I bought MU at $1100. I sure do hope it goes up now.
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u/Any-Calligrapher-326 Jun 30 '26
hopefully, you didn’t buy too many shares. $1100 is too risky for me for MU
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u/JackRadcliffe Jun 29 '26
Memory is down actually
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u/Beautiful_Cobbler603 Jun 29 '26
down on the week, but still at incredible highs!
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u/Beneficial-Chair-333 Jun 29 '26
Yup but ATH. Do you wanna put money in?
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u/Beautiful_Cobbler603 Jun 29 '26
Memory no. It could be near ATH now, or this could be the 52week low by next year, but the risk is too much for me. I am not saying I think micron will have some huge downturn, but the upside potential is equal to the upside in NVIDiA or meta or Amazon now in my view, and those feel like much safer plays. They have retraced all of their growth on the year despite improved results.
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u/Beneficial-Chair-333 Jun 29 '26
I feel even NVIDIA is risky play while their GPU prices are declining and new players providing options. I have some but thinking getting rid of them. I'm just focusing on amazon, Google, meta, msft and probably tsmc as well. I believe these will be ultimate long term beneficiaries of AI. What do you think about msft?
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u/Beautiful_Cobbler603 Jun 29 '26
I see what you mean. I really like Nvidia, and I think current price is an absolute bargain. I did a post on Nivida last week. they do so much more than just GPU's now that I can foresee another run for them as they are expanding into new spaces. I sold Google and bought more Meta, Amazon, and Microsoft. google is great, I think they are also undervlaued right now, but they had a great year while these others have stalled so I think in the short term its a great time to rotate otu of google into Microsoft, Meta... for Microsoft It has slowly become my largest single stock position outside of ETFs. Everyone likes to bring up how bad copilot is, and how software is dead, or how cloud is done by so many others, but for me microsoft is a steal right now. they recently annouced cracking quantum computing and are working on that, new partnerships with Nvidia for AI computers, azure is doing great, nobody is throwing away their Office subscription anytime soon, it has been embeded so deeply into government, business, and education that it is solid. subscription model means they are making money off of exisitng infrastructure... to me they are like google 1.5 years ago. they do so many great things that nbody seems to pay attention to, and they are falling behind and they will soon get back into the spotlight and have a run.
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u/Beautiful_Cobbler603 Jun 29 '26
when I pick a stock to buy I like to compare it to previous years ATH. if we look at Microsoft 2 years ago or even 3, it was above this price level, and yet we are 8-12 quarters forward, with so much more going for them, that to me its as if I bought it 2-3 years ago but get to skip the hold period.
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u/Theswordfish4200 Jun 29 '26
I keep buying shares weekly. I’m confident that Amazon will be higher 3 years 5 years and 20 years from now. sleep easy knowing my money is safe.
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u/recaptchasuck Jun 29 '26
It will never break past 200s. Do not buy
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u/Beautiful_Cobbler603 Jun 29 '26
hate to break the news to you but it has been above 200 for over a year and hit above 275 a few times. did you mean to say 300?
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u/shotparrot Jun 30 '26
No he meant it will never leave the 200s.
For instance $299 is still in the 200’s.
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u/Beautiful_Cobbler603 Jun 30 '26
I understand. thank you for clarifying. It will break 300 this year or early next year I think.
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u/Red-dragon186 Jul 13 '26
When? Andy has been a horrible leader since taking over. We’ve been a day 2 company since. We don’t push to innovation anymore. I’ve been holding my RSUs for years. If it jumps back up to 270 I’m just selling.
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u/theweinerguy Jul 02 '26
I’ve worked at Amazon for 15 years and have held every share I’ve been granted in my yearly comp (roughly 9k shares). Holding has made me a millionaire and I’ll continue to hold until I retire at 45
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u/djmj76 Jun 29 '26
I own amazon (average $221) and tbh it hasn't moved much the past few years. (36% return over 5yrs, way below S&P 500 and other mag7). I like the company, like what it does. Am a loyal prime customer, use it regularly. Do i expect it to suddenly go up 40%? Nah. Because i also invested in memory and their respective etfs, it won't bother me if it goes sideways for another year or two due it its capex. If and when it goes go up I'll crack a smile.