August 26, 2026

Amazon Has Been Lagging the S&P 500 in 2026. This Is the Only Reason I'd Need to Buy the Stock in August Without Hesitation.

Key Points

Amazon stock is trading at 21 times earnings.
Other than a dip to 19 in June, it is Amazon’s lowest valuation in at least 10 years.
The company has a whopping $496 billion in backlog contracts.
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Amazon (NASDAQ: AMZN) stock has trailed the S&P 500 for most of 2026 and is now in line with the large-cap benchmark, up 12% year-to-date.

There are several reasons Amazon’s stock has lagged for most of this year, but there is one major reason investors should buy it now in August.

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Amazon stock is trading at one of its lowest valuations in a long time. Its current P/E ratio is 21, and other than a dip to 19 in June of this year, it hasn’t been this low in at least 10 years, but likely much farther back than that.

AMZN PE Ratio data by YCharts

That right there is enough to signal a strong buy on Amazon stock. Any time one of the largest, most successful companies in the world, one of the Magnificent Seven stocks, is trading at a decade-low valuation, the buy sign should be flashing.

In Amazon’s case, it is the leader in both of its major markets: e-commerce and cloud computing. It’s just a no-brainer buy right now.

A massive $496 billion backlog

The dirt cheap valuation is the number one reason to buy, but also, Amazon is heading back in the right direction after a bumpy start to the year.

One of the chief concerns about Amazon was its massive increase in spending on artificial intelligence. At the start of the year, Amazon proposed a whopping $200 billion in capital expenditures to maintain the huge demand for AI infrastructure. That’s some 51% more capex spending than in 2025.

Investors balked, as Amazon had been steadily losing market share to Microsoft (NASDAQ: MSFT) and Google, owned by Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL), so they questioned whether more spending was the answer, particularly given its cash-flow depletion.

But Amazon officials argued that the infrastructure was necessary to regain lost market share and meet demand from its growing backlog of $496 billion in contracts. In fact, CEO Andy Jassy said on the Q2 call that Amazon now projects $220 billion in capex in 2026.

See also <!DOCTYPE html><html lang="en"><head><meta charset="UTF-8"><meta name="viewport" content="width=device-width, initial-scale=1.0"><title>Netflix's Stellar Performance in Q1 2024</title></head><body><h2>The Raging Success of the Streaming Giant</h2><p>Netflix reported exceptional first-quarter 2024 earnings of $5.28 per share, outperforming the Zacks Consensus Estimate by a staggering 17.07%. This marked a remarkable 83.3% surge from the preceding year, reflecting the company's undeniable prowess in the streaming industry.</p><p>The streaming behemoth saw revenues soar to $9.37 billion, showcasing a robust 14.8% year-over-year growth that surpassed the consensus expectations by 1.18%. The surge can be attributed to a strategic combination of revenue initiatives, such as cracking down on password-sharing, introducing an ad-supported tier, and implementing recent price hikes on select subscription plans.</p><h3>The Growth Engine: Subscriber Momentum</h3><p>Netflix ended the first quarter with a solid user base of 269.6 million paid subscribers spanning over 190 countries globally, depicting a commendable 16% annual increase. The company experienced a considerable influx of new customers, with a strong presence noted in the United States and Canada.</p><p>The quarter saw a substantial uptick of 9.33 million paid subscribers worldwide, accompanied by a 1% increase in average revenue per membership (ARM) on a reported basis and a robust 4% growth on a foreign-exchange neutral basis. This impressive performance follows the addition of 1.75 million paid subscribers in the corresponding period last year.</p><p>In a bid to diversify its content offerings, Netflix attributed its success to exclusive intellectual property like original series, including critically acclaimed titles like "Griselda," "3 Body Problem," "Avatar: The Last Airbender," "Love Is Blind Season 6," "American Nightmare," and "Dave Chappelle: The Dreamer."</p><p>The platform also noted significant viewership of U.K. content and original Korean titles, underscoring the global appeal of its diverse content library.</p><h3>Expanding Horizons and Strategic Shifts</h3><p>In a bold move to solidify its dominance in the streaming landscape, Netflix is venturing into new territories such as live events. The company recently secured a groundbreaking $5 billion deal to exclusively stream WWE's flagship wrestling show, "Raw," disrupting traditional broadcast paradigms that have stood unchallenged for over three decades.</p><p>Furthermore, Netflix forged a strategic partnership with Rockstar Games’ "Grand Theft Auto" franchise, signaling its foray into the lucrative video game sector—a move that is poised to redefine the boundaries of entertainment convergence.</p><p>A surprising announcement by Netflix detailed its decision to discontinue reporting paid quarterly membership and revenue per subscriber starting Q1 2025. This strategic pivot aims to shift investor focus towards long-term trends rather than short-term fluctuations influenced by transient factors like programming changes and economic volatility.</p><p>While tech titans like Apple and Amazon maintain secrecy around their streaming subscriber figures, Netflix's transparent approach sets it apart in an industry where data privacy often trumps transparency.</p><p>Shares of Netflix have exhibited extraordinary resilience, delivering a robust 25.4% YTD return that eclipses the performance of industry stalwarts like Apple, Amazon, and Disney.</p><h3>Unveiling Netflix's Segmental Revenue Landscape</h3><p>Breaking down its regional revenue streams, Netflix's United States and Canada segment boasted revenues of $4.22 billion, representing a commendable 17.1% year-over-year increase and accounting for 45.1% of total revenues. The ARPU in this segment rose by 6.9% from the prior year.</p><p>The European, Middle Eastern, and African market witnessed revenues of $2.95 billion, marking a 17.5% annual upsurge and contributing 31.6% to the company's overall revenues.</p><p>In the Latin American region, revenues amounted to $1.16 billion, with an 8.9% year-over-year increase and a subscriber base of 47.72 million.</p><p>The Asia Pacific segment recorded revenues of $1.02 billion, showing a strong 9.6% growth, underscoring the company's burgeoning presence and subscriber base in this lucrative market.</p></body></html><html> <head> <title>Netflix's Financial Report for Q1 2024</title> </head> <body> Netflix's Financial Performance Shines with Steady Growth

“Even at that amount, we will still not have enough capacity to meet all the demand we have in 2026, and I believe this dynamic will also be true in 2027, too,” Jassy said on the call.

Analysts are bullish on Amazon

The investments may already be paying off as Amazon reported blowout second-quarter earnings. Amazon Web Services, its cloud computing business, had its fastest growth in more than four years with revenue rising 37%. Overall revenue increased 20%.

Further, its operating income soared 43% to $27.5 billion while net income increased 243% to $62.6 billion, boosted by its investments in Anthropic.

Amazon anticipates sales to rise 9% to 12% year over year in the third quarter and operating income to be between $22.5 billion and $26.5 billion, up 29% at the midpoint.

That’s not quite the growth rate Amazon saw in Q2, but at that low multiple, Amazon stock is just too attractive to pass up with its massive earnings power and growing backlog. Wall Street is almost unanimously in agreement, with 97% of analysts rating it a buy and a median price target of $327 per share. That suggests 27% upside for Amazon stock.

Should you buy stock in Amazon right now?

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Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, and Microsoft. The Motley Fool has a disclosure policy.

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