Amazon(US:AMZN) Zhi Tong Cai Jing·2026-02-02 07:06Core Viewpoint - Amazon appears undervalued ahead of its Q4 earnings report, with a potential upside of over 28% in the next 12 months, and strong performance expected for Q4 [1] Group 1: Financial Performance - Amazon's revenue increased from $107 billion in 2025 to over $637 billion in the last 12 months, with operating income rising from approximately $2.2 billion to about $68.6 billion during the same period [1] - In Q3, Amazon exceeded revenue and EPS expectations by 1.35% and 25.3% respectively, marking the 11th consecutive quarter of EPS exceeding expectations [2] - Management set a revenue guidance for Q4 between $206 billion and $213 billion, indicating a year-over-year growth rate of 11.56% [2] Group 2: Capacity and Infrastructure - Amazon plans to increase its capacity by adding 1,000 megawatts in Q4, which will help meet the high demand for AI infrastructure and convert backlog orders into actual revenue [3] - The company is expected to exceed $150 billion in capital expenditures for FY2026, the highest among the "Tech Seven" [2] Group 3: Market Sentiment and Valuation - Analysts believe that the current market consensus is overly pessimistic, particularly regarding the outlook after Q4, and that FY2026 guidance will be strong [1][3] - Amazon is considered one of the cheapest mega-cap stocks, with its forward P/E ratio close to or below the average of its peers [4] - The expected EPS growth rate for Amazon is the highest among similar-sized companies, justifying a trading multiple of 28-30 times by the end of 2027 [6][9] Group 4: Future Projections - The consensus EPS for FY2023 and FY2024 is expected to exceed by 6.8% and 7.46% respectively, with further outperformance anticipated for FY2026 and FY2027 [9] - The projected EPS for FY2027 is estimated at $10.79, leading to a target price of $312.82 per share, representing a 28.7% increase from the current stock price [9]