Amazon's Profit Problem Could Be Masking Its Next Stock Rally

While every other Magnificent 7 stock is basking in strong gains this year, Amazon.com Inc (NASDAQ:AMZN) is the lone outlier in the red. At first glance, its 11.37% EBIT margin looks meager compared with peers like Meta Platforms Inc (NASDAQ:META) (43.37%) and Microsoft Corp (NASDAQ:MSFT) (45.62%), fueling concerns that the e-commerce giant is struggling. Track AMZN stock here. But beneath the surface, Amazon's so-called "profit problem" may actually be its stealth advantage.Read Also: Amazon Vs. MercadoLibre: Which Is The Better E-Commerce Bet At These Attractive Valuations?Low Margins, High PotentialThe low-margin retail business, long criticized for thin returns, is masking high-growth segments like AWS and advertising. Amazon Web Services continues to post robust expansion, benefiting from enterprise cloud demand and AI-driven workloads. Meanwhile, Amazon's advertising revenue is growing over 20% year-on-year, a segment that operates at far higher margins than retail. Once the market begins to fully separate these divisions in its valuation lens, Amazon could catch up with its Mag 7 peers quickly.Valuation Signals A Catch-Up PlayFrom a valuation standpoint, Amazon looks compelling. Its forward EV/EBITDA sits at 14.35x, far below Microsoft's 20.33x and Nvidia Corp's (NASDAQ:NVDA) 34.04x, while the PEG ratio of 1.93 suggests that growth isn't fully priced in. In other words, investors are paying for potential in areas like cloud and ads, not the low-margin retail business dragging headline profitability.Earnings Could Trigger A SnapbackThis structural contrast makes Amazon unique within the Magnificent 7. While other tech giants are riding the momentum of historically high margins or AI-driven hype, Amazon's quieter segments could produce outsized returns once market perception catches up. The upcoming earnings release adds fuel to this narrative, as investors will be scrutinizing AWS growth and ad performance closely. Any positive surprise could act as a trigger for a snapback rally, repositioning Amazon alongside its high-flying peers.In short, what looks like inefficiency in Amazon's financials is actually strategic reinvestment in high-return areas. For investors, this makes Amazon the Magnificent 7 stock to watch closely — a company whose "problem" could very well turn into its next big advantage. Nvidia Skyrockets A Stunning 475% Vs. Mag 7 Since 2022