Bank of America resets Amazon stock forecast

Core Viewpoint - Amazon has shown strong performance, gaining about 6% over the past five days, outperforming the S&P 500, which is a positive indicator for the company as it enters 2026 [1] Company Performance and Projections - Bank of America has identified Amazon as its top mega-cap pick for the first half of 2026, primarily due to its exposure to AI through AWS [3] - Analysts anticipate an upside to Wall Street's AWS growth estimates of 21% for 2026, supported by improved data center capacity compared to 2025 [3] - GAAP operating income is projected to grow by 25% in 2026, surpassing that of mega-cap peers, which is expected to bolster Amazon's valuation as AWS revenues increase [5] Product Developments - Amazon is set to roll out Trainium 3 chips in 2026, which are expected to deliver 4.4 times more compute power and four times greater energy efficiency than Trainium 2 [6] - Analysts expect customer adoption of Trainium 3 to expand beyond current users, indicating a positive trend in product uptake [6] Financial Analysis - A buy rating has been reiterated for Amazon stock with a target price of $303, based on a sum-of-the-parts analysis valuing AWS at 10x 2027 sales and other segments at various multiples [7] - The price target implies a blended price-to-sales ratio of 3.7 times, 13 times 2027 EBITDA, and 33 times 2027 EPS [7] Competitive Landscape - Amazon faces increasing competition from offline and local retailers, which could impact its market position [10] - The company is also dealing with AWS client cost optimization, which may affect revenues and margins [10]