Down 20%, Here’s Why Amazon Can Surge 40% — or More!

Core Viewpoint - Amazon's stock has faced challenges in 2025 after a strong recovery in 2023 and 2024, with current trading reflecting investor concerns over high capital expenditures and competitive pressures [2][4]. Stock Performance - Amazon shares rose 80% in 2023 and 44% in 2024, but only increased by 5% in 2025 amid economic pressures [2]. - The stock has traded between $220 and $240 per share since last August, with a brief peak at $254 in November [3]. Market Sentiment - Wall Street's consensus price target for Amazon is $289 per share, indicating a potential upside of about 40% from the current price of $207 [3]. - Investor worries are reflected in the stock's range-bound trading, primarily due to high capital expenditures and margin concerns [4]. Financial Outlook - Amazon is guiding for $200 billion in capital expenditures for 2026, significantly up from $131 billion in 2025, raising fears of margin compression and negative free cash flow [4][7]. - AWS revenue grew to $129 billion with a 24% growth rate, but this growth lags behind competitors like Microsoft and Google [5][7]. - The advertising unit generated $69 billion in revenue, growing at 23% [6][7]. Valuation Analysis - A sum-of-the-parts valuation suggests Amazon's market capitalization of approximately $2.2 trillion may undervalue the company, with a total estimated value of $2.6 trillion [6][7]. - The e-commerce division is valued at roughly $300 billion, while AWS is valued at approximately $1.8 trillion, and the advertising unit at about $500 billion [6].