Target price lowered but optimistic expectations remain unchanged! Bank of America is optimistic about Amazon.com, Inc. (AMZN.US) with accelerated growth in AWS and resilience in retail business, reiterating a "buy" rating.

Ahead of Amazon.com, Inc. (AMZN.US) announcing its fourth-quarter financial report on February 5th, Bank of America Corp released a research report stating that due to the compression of SaaS business valuation multiples, they have lowered their target price from $303 to $286. However, the bank reiterated its "buy" rating for Amazon.com, Inc., citing the company's accelerated growth in cloud computing business AWS, resilience in the retail sector, and improving sentiment in the artificial intelligence (AI) market as factors that could drive the company's valuation higher. Bank of America forecasts that Amazon.com, Inc.'s revenue and EBIT in the fourth quarter will reach $213 billion and $26 billion, respectively, surpassing market expectations of $211 billion and $246 billion. The core growth engine is the AWS business, with expected revenue growth of 22% in the fourth quarter, exceeding market expectations of 21% and accelerating from the 20% growth in the third quarter. This growth is attributed to the continuous expansion of AWS capacity, with 1 gigawatt of power capacity added in the fourth quarter to support business expansion, while demand continues to outstrip supply, providing support for pricing. In terms of North American retail business, credit card transaction data compiled by Bank of America shows that online consumer spending remained stable in the fourth quarter. With improvements in delivery efficiency, competitive prices, and expansion of grocery business, Amazon.com, Inc. is poised to continue gaining market share. It is expected that the performance of its North American retail business will slightly exceed market expectations - the market currently expects a slowdown in year-on-year growth to 10%. Additionally, growth in advertising business, decreased fuel costs, and logistics process optimization will drive an increase of 50 basis points in the profit margin of the North American retail sector year-on-year, along with cost savings from fourth-quarter layoffs, leading to further improvement in retail profit margin in the first quarter of 2026. Looking ahead to the first quarter, Bank of America expects Amazon.com, Inc. management to provide cautious guidance, with revenue expected to be between $173 billion and $178 billion, and operating profit between $18.5 billion and $22.5 billion, relative to market expectations of $175.4 billion in revenue and $22.1 billion in profit. However, the bank emphasizes that Amazon.com, Inc. has often outperformed its own guidance in the past, and if fourth-quarter performance exceeds expectations, it may lead to an upward revision of first-quarter guidance. Additionally, Bank of America predicts that Amazon.com, Inc.'s capital expenditures in 2026 will reach $161 billion, higher than the market's expected $160 billion, reflecting the company's continued significant investment in AI infrastructure. On the valuation front, Bank of America believes that Amazon.com, Inc.'s stock price underperformed the market in 2025, mainly reflecting market concerns about its AI layout and cloud business growth. However, with improvements in AWS capacity in 2026, as well as several large AI companies expected to go public in the next two years, there will be more favorable references for AWS valuation, leading to an overall increase in Amazon.com, Inc.'s valuation.