What Will Amazon Stock Be Worth in 2025? I’m Taking a Bearish Position

Using Amazon as a Market Benchmark

For someone like me who focuses on non-US dividend paying stocks, Amazon Inc (NASDAQ:AMZN) is quite different from the usual stocks I invest in. However, I closely monitor AMZN’s valuation metrics as it is a well-diversified business that correlates strongly with benchmarks like the NASDAQ 100 (QQQ) and S&P 500 (SPY). Instead of analyzing all 100 or 500 stocks in QQQ or SPY, respectively, I find it easier to evaluate representative companies like AMZN. In fact, I have even used options on AMZN as a hedge against broad market fluctuations. In this article, I will discuss the factors that may impact AMZN’s business and share price in the short term and over the next two years. I will also share specific option trades I am considering to take advantage of potential moves in AMZN.

AMZN as a Partial Market Benchmark

Some may question my practice of trading AMZN in a similar manner to my QQQ or SPY exposure. However, I have previously shown how closely SPY can be tracked with just 5 stocks. Although AMZN represents only a small percentage of QQQ and SPY, its short-term movements are highly correlated with these benchmarks. This is because AMZN’s share price is influenced by the buying and selling activity of index ETFs like QQQ and SPY. The correlation between AMZN, QQQ, and SPY is evident in the first chart, which compares the share price movements of AMZN, QQQ, and SPY in the first five months of 2023. It is worth noting that during periods when growth-tilted QQQ rose more than the more balanced SPY, AMZN experienced even greater growth, indicating that AMZN is a more extreme manifestation of US large-cap growth than QQQ.

Chart Comparing AMZN's Share Price with QQQ and SPY
Data by YCharts

When looking at the performance over a longer time horizon, particularly the past two years, AMZN’s underperformance compared to QQQ and SPY becomes apparent. Although Amazon has continued to grow during this period, the market has significantly reduced the price it is willing to pay for each dollar of Amazon’s sales, earnings, or book value. In May 2021, AMZN stock was trading at approximately 4x Amazon’s top-line revenues or 16x book value. Today, those ratios are a little over 2x and 8x, respectively. These changes in market valuation have a more significant impact on the value of your brokerage account than the actual performance of AMZN’s business over shorter time horizons. This is why I find it helpful to analyze individual stocks like AMZN when assessing changes in market valuation. The chart below depicts the decline in AMZN’s valuation multiple compared to the decline in the CAPE ratio of the MSCI USA index over the past two years.

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Chart Comparing AMZN's Valuation Multiple with MSCI USA CAPE Ratio
Data by YCharts

Based on these factors, I consider AMZN as a benchmark for companies with higher growth rates than the overall market, significantly more expensive valuations than their peers, and a more volatile valuation multiple.

Amazon’s Path to $1 Trillion in Revenue

While AMZN’s market cap has surpassed $1 trillion, my focus lies in when we will witness the first public company to generate over $1 trillion in annual revenues. As of the last reported fiscal year, Amazon ranks as the world’s third-highest-grossing public company, with FY2022 revenues of $514 billion, trailing behind Walmart and Saudi Aramco. The chart below displays the annual revenues of the highest-grossing US-listed companies over the past 40 years, indicating that Amazon’s revenue is rapidly catching up to Walmart’s and may surpass it in the next few years.

Chart Comparing Annual Revenues of Highest-Grossing US-Listed Companies
Data by YCharts

According to analyst estimates, Amazon is projected to reach the $1 trillion revenue mark by fiscal year 2029. Although these estimates are not flawless, they represent the consensus among a significant number of analysts who possess a wealth of knowledge about Amazon’s business and financials. The analysts’ revenue estimates for 2023-2025, averaging around 10% growth per year, provide valuable insight. It is also noteworthy that even analysts projecting revenue estimates for 2028 maintain a consistent 10% growth rate for the next five years.

Analyst Estimate of Amazon's Revenues
Seeking Alpha

Given these estimates, it is clear why the market has adjusted its valuation multiples for AMZN. Consistently downward revisions in revenue growth expectations have resulted in a reduced Price/Sales ratio and Price/Book ratio for AMZN stock. These revisions are still ongoing, suggesting that caution should be exercised when basing predictions on the current $700 billion sales estimate for 2025.

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Revenue Estimate Revisions for AMZN
Seeking Alpha

While I normally prioritize profitable and dividend-paying companies, it is important to note that Amazon’s revenue growth is not uniform across its various business segments. The e-commerce and fulfillment business, which is the largest and least profitable, has experienced slower growth. Conversely, Amazon Web Services (AWS), the smallest and most profitable segment, has shown immense growth. While some argue that it is businesses like AWS that justify Amazon’s valuation, I remain skeptical of investing $1.25 trillion primarily in a relatively smaller business like AWS. For this reason, I maintain a bearish outlook and recommend option strategies that involve buying put options.

To determine the appropriate strike prices for options expiring in 2025, it is necessary to consider the number of shares outstanding. Although AMZN’s share count has increased slightly over the past decade, at a rate of approximately 1% per year, it is important to account for potential dilution between now and 2025. Assuming a share count of 10.5 billion, I will proceed with the option strategies described below.

Option Strategies for AMZN Bears

When examining the chart of AMZN’s Price/Sales ratio during its 43.5% year-to-date return, we can observe a recovery from 1.7 to 2.4. Based on this trend, my option strategy assumes that AMZN’s Price/Sales ratio will at least regress back to 1.7 over the next two years, potentially going even lower if the e-commerce business faces challenges or if AWS encounters increased competition.

Chart of AMZN's Price/Sales Ratio
Data by YCharts

One strategy I prefer for stocks that I believe are overvalued by around 20% is a 1×2 put spread. In this case, I would consider the following specific options, with a June 20th, 2025 expiration date:

  • Buying 1x 125 strike put
  • Selling 2x 100 strike puts

The advantage of this trade is that it can be implemented at zero upfront cost. By selling an additional 100 strike put, I am essentially funding the 125-100 put spread. If AMZN falls below $100 per share (approximately 1.5x sales), I would need to purchase 100 shares at $100 each. However, $2,500 of the $10,000 required to buy those shares would have been obtained as profit from the put spread. Consequently, I would only experience a net loss if AMZN falls below $75 in mid-2025, which would imply a Price/Sales ratio below 1.2x or significantly lower revenue than the projected $700 billion. Currently, this option combination has close to “zero delta,” meaning its value will not fluctuate significantly with short-term movements in AMZN’s share price. However, the value of the two short puts should decline faster than that of the long put.

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Alternatively, a different strategy would be to purchase puts or put spreads on AMZN, which carry a net negative delta from the outset and present limited downside risk, but require an upfront cost. For example, I am currently considering buying the 140 strike put and selling the 120 strike put, with a premium of approximately $10 per share or $1,000 in total. Should AMZN’s stock stay flat or decrease over the next two years, these options would provide a maximum payout of $2,000, doubling the initial risk of $1,000. On the other hand, if AMZN’s stock rises above 140 by mid-2025, the entire $1,000 premium would be lost. Alternatively, I could sell the 120-140 call spread, receiving an upfront payment of $1,000, with the risk of needing to pay back $2,000 if AMZN finishes above $140 per share in 5 years. The premium of $10 per share is comparable to the current premium for the June 2025 100 strike put, which requires a more bearish view to yield profits.


Amazon’s valuation continues to be lofty, particularly considering the composition of its business—consisting of a large, low-margin e-commerce segment and a smaller, faster-growing, and higher-margin AWS segment. I believe that downward revisions in revenue projections and a reversal of this year’s valuation increase will put downward pressure on AMZN and subsequently on QQQ. Considering these factors, I anticipate AMZN’s stock to be valued in the $90-120 per share range by mid-2025. The option strategies I have outlined offer effective ways to take advantage of potential movements in AMZN’s stock with limited risk.

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