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Investing.com -- UBS reiterated its bullish stance on Amazon (NASDAQ:AMZN) in a note Friday, calling the company “a coiled spring” ready to outperform.
The bank’s note comes despite market concerns over AWS growth and capital expenditures, following Amazon’s latest quarterly earnings report on Thursday.
UBS analysts argued that the difference between AWS growth rounding up to 18% versus down to 17%, a $10 million delta, triggered an “extreme” reaction in markets.
“On a $31B quarterly revenue franchise to result in a ~$150B decrease in market cap seems extreme,” UBS wrote.
While the bank acknowledged investor disappointment over the lack of clearer signals for revenue acceleration in Amazon Web Services, it questioned the logic behind the sell-off.
“To sell the stock is to believe that management and the board are making the economically irrational decision, in our view, to invest an increasing amount of capital (~$250B during 2024-2026) to maintain incremental revenue growth at some $17-18B per year,” analysts said.
UBS said it finds such a scenario difficult to believe, describing Amazon as “one of the best capital allocators in our space.”
The firm raised its estimates slightly following stronger-than-expected e-commerce and advertising results, while maintaining its $271 price target on the stock.
The bank explained that bulls see potential upside from stronger Q3 guidance, widening shipping cost advantages, and improved conversion rates from expanded Prime delivery. They also cited Prime Video ads as a new driver of retail margins.
Bears, however, remain cautious due to AWS margin compression, elevated capital expenditures, and potential near-term operating margin dilution from projects like Kuiper.
UBS values Amazon using a 30x P/FCF multiple based on 3Q26–2Q27 estimates.