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Amazon's shares hit a new high in November.
But that doesn't mean the shares are to be avoided.
The stock seems reasonably valued, especially given its great growth prospects.
Shares of Amazon (NASDAQ: AMZN) set an all-time high in November 2025. You probably know that the company has been growing by leaps and bounds. Indeed, over the past 25 years, its stock averaged annual gains of 24%. Over the past three years, it averaged annual gains of 40%!
Given all that, you might wonder whether it makes any sense to invest in Amazon now. My answer to that would be...yes.
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Image source: Getty Images.
Here's why: For starters, while the stock has surged over recent years and decades, it has taken a bit of a breather recently and was only up about 5% in 2025.
Also, investors shouldn't focus too much on past results. Instead, focus on where the stock is now, and where it could be in the future based on how the business is doing. Compare its stock price to other measures such as earnings, and to past levels of those measures. For example, Amazon's recent forward-looking price-to-earnings (P/E) ratio of 28 is well below its five-year average of 44, suggesting that the stock is undervalued. Its recent price-to-sales ratio of 3.6, meanwhile, is a bit above its five-year average of 3, suggesting that the stock is a bit overvalued. Stock valuation is never precise, as one must take many measures into account, some of them rather subjective and not just comparisons to the past. Still, Amazon's shares seem at least reasonably valued at recent levels.
Before investing, though, you need to consider whether you expect the company to be much bigger in the future, as stock price should follow growth. I think it will be. Not only is it a massive online marketplace, but, perhaps more importantly, it's a leader in cloud computing with its Amazon Web Services (AWS) business, and its advertising division is growing rapidly, too. Best of all, it has multiple competitive advantages, such as its network effect and economies of scale.
Before you buy stock in Amazon, consider this:
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Selena Maranjian has positions in Amazon. The Motley Fool has positions in and recommends Amazon. The Motley Fool has a disclosure policy.
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