Amazon Stock Hasn’t Been This Cheap in Ten Years. Is the Past Sale Overdone?
Amazon(NASDAQ: AMZN )’s valuation has done something surprising. Even though a price-to-earnings (P/E) ratio of 29 may not sound cheap, the stock is coming off its lowest since the financial crisis.
The company operates in competitive industries such as retail and cloud computing, and its spending on capital expenditures (capex) may have scared off some investors. However, Amazon’s P/E ratio doesn’t drop below 30 very often. Knowing that, is the sale of consumer-restricted stock too much, or are Amazon’s days of commanding high prices over?
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Amazon status
It’s easy to understand why Amazon’s spending concerns many investors. It promised to spend 200 billion in capex in 2026 alone. This is not unusual in today’s technology industry but it is more than $175 billion to $185 billion since Alphabets or the promised $125 billion to $145 billion Meta Platforms.
What’s more, despite its $143 billion in capital, capex spending has reduced free cash flow to just $1.2 over the trailing 12 months. As a result, it has sold bonds this year to help cover capex costs, including the issuance of at least $25 billion this month. Considering its vast economy, such a move would have seemed unthinkable until recently.
However, investing in Artificial Intelligence (AI) appears to have improved the company’s performance, including its e-commerce components. In the first quarter of 2026, net sales increased 17% year over year, which is almost double the 9% annual increase reported in Q1 2025.
In the same quarter, revenue increased 77% year-over-year, even more than the 64% year-over-year increase in Q1 2025. Considering that growth, investors could see 29 times earnings at a historically cheap price. Still, analyst estimates call for an estimated 21% increase in annual profits, a significant decline that could cool investors’ enthusiasm for the low P/E.
Has the sale of Amazon stock gone too far?
Considering Amazon’s history, capex spending, and improved results, Amazon appears to be in an oversold position. Admittedly, the P/E ratio indicates that the stock has not been a sad investment, as the large capex spending and the impending decline in profit growth may give investors pause.
