Amazon's Earnings Could Fuel a Rapid Breakout

Core Viewpoint - Amazon.com Inc. has shown a recent gain of 3.5%, closing just above $173, but remains down 30% from its all-time high in February, lagging behind the S&P 500 during the market rebound [1][2]. Analyst Sentiment - Despite the stock's muted performance, analysts from Telsey Advisory Group, Goldman Sachs, Jefferies, and Scotiabank have reiterated Buy ratings, with Scotiabank setting a price target of$ 250, indicating over 40% upside from the recent close [2]. - Morgan Stanley maintains Amazon as a Top Pick with an Overweight rating, lowering its 2026 EPS forecast to $7 and resetting its price target to$ 245, still above current trading levels [3]. - Analysts view Amazon's current weakness as an opportunity, citing valuation, growth potential, and AI leverage as reasons for bullish sentiment ahead of earnings [4]. Valuation Comparison - Bank of America highlighted Amazon's valuation at 23x 2026 GAAP P/E, which is significantly lower than Walmart's 32x multiple, suggesting that macro headwinds have led investors to favor Walmart despite Amazon's superior AI potential and margin upside [5]. - Amazon's scale in logistics positions it well to gain market share amid rising tariffs, with the current P/E discount being notable as the stock trades at levels last seen in 2020 [6]. AWS and Macro Concerns - Wells Fargo reported that Amazon Web Services (AWS) has paused some leasing discussions for data centers, particularly internationally, which adds to cautious sentiment in a high-margin business [7]. - The pause in leasing discussions reflects broader industry trends as companies reassess aggressive leasing activity from the past year, although it does not imply cancellations [8]. - Macro uncertainties, including higher interest rates and trade concerns, continue to affect sentiment towards Amazon, despite analyst support [9]. Earnings Outlook - Amazon's upcoming earnings report is seen as a potential catalyst for the stock, with a 12-month price forecast averaging $248.13, indicating a 33.22% upside [10]. - A strong earnings report could lead to short-covering and renewed institutional interest, while a weaker report might prolong the current stagnation [11]. - Analysts remain optimistic about Amazon's valuation metrics, which are beginning to appear attractive, although buyer enthusiasm has yet to materialize [12].