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AWS may have underwhelmed investors relative to the cloud growth seen from peers like Microsoft and Google
- Amazon shares tumbled in the wake of the company’s quarterly results, but analysts say there’s an opportunity to buy the dip.
- AWS may have underwhelmed investors relative to the cloud growth seen from peers like Microsoft and Google.
- UBS analysts said traders shouldn’t be scared off by Amazon’s growing investments in AI infrastructure.
Amazon (AMZN) shares plunged after the company’s quarterly results, as investors may have been hoping for stronger cloud growth. Some analysts, though, are raising their price targets.
JPMorgan analysts said they “would buy the pullback,” as Amazon shares have tumbled more than 6% in premarket trading Friday. The bank raised its price target to $265 from $255, implying 23% upside.
Amazon Web Services is a likely culprit for the stock slump, JPMorgan said. The cloud division’s revenue growth, while in line with analysts’ expectations, didn’t accelerate from the previous quarter. Meanwhile, rival cloud offerings Microsoft (MSFT) Azure and Alphabet’s (GOOGL) Google Cloud Platform delivered breakout performances.
On the company’s earnings call, CFO Brian Olsavsky said Amazon spent $31.4 billion in capital expenditures in the second quarter and expects to maintain that level of investment through 2025. “AWS continues to be the primary driver, as we invest to support demand for our AI services,” Olsavsky said, according to a transcript provided by AlphaSense.
Analysts at UBS, which maintained a price target of $271, said investors shouldn’t be too worried about growing capex.
“[T]o 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,” UBS said. “But we find that to be a difficult scenario to believe, especially for what has been one of the best capital allocators in our space.”
Citi, meanwhile, raised its price target to $270, arguing that the increase in investment “highlights continued demand strength as AWS alleviates its infrastructure capacity constraints.”
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