Amazon's AWS Makes It Top Large Cap Internet Stock For 2026: Analyst

Core Viewpoint - Wall Street is increasingly focused on Amazon's ability to leverage improvements in AI execution at Amazon Web Services (AWS) to drive stock momentum in 2026 [1] Analyst Take - BofA Securities analyst Justin Post reiterated a Buy rating on Amazon with a price target of $303, highlighting that improved sentiment around AWS's AI capabilities could be a key driver for Amazon in 2026 after cloud concerns negatively impacted the stock in 2025 [2] - Amazon's stock gained 5% last year, underperforming the S&P 500's 16% rise and the Nasdaq's 20% gain, as strong retail execution and margin expansion were not enough to alleviate investor concerns regarding AWS's AI competitiveness [2] AWS Positioning and Growth Outlook - Weaker confidence in AWS's positioning contributed to a 15% year-over-year decline in Amazon's forward EV/EBITDA multiple [3] - Expectations for AWS growth to accelerate in 2026 are based on new capacity coming online and leadership changes that may enhance the company's AI narrative, alongside strong growth in Rufus usage supporting Amazon's retail business [3] - Long-term investors may benefit if AWS can leverage its proprietary technology, including large language models and Trainium chips, to improve its competitive stance and become a lower-cost provider as enterprises focus on AI inference cost efficiency [4] Valuation and Financial Estimates - Amazon is currently trading at approximately 11x Street 2027 EBITDA and 25x GAAP EPS, which is slightly above Microsoft Corp at 23x but below Alphabet Inc and Walmart Inc at 26x and 35x respectively [5] - The valuation reflects uncertainty regarding AWS's positioning, but Post considers Amazon the top large-cap internet stock for 2026 due to AWS AI exposure, anticipated cloud acceleration, and a strong retail position [6] - Projected GAAP operating income growth of over 20% in 2026 is supported by retail margin expansion driven by advertising growth, inbound efficiencies, robotics, and headcount leverage [6] - Revenue for 2026 is estimated to grow 12% year-over-year to $801 billion, with GAAP EPS projected at $7.75, while AWS revenue is estimated at $156 billion, slightly above the Street's estimate [7]