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Amazon's median target price of $262 per share currently implies 24% upside, making it the best trillion-dollar stock to buy now, according to Wall Street.
Amazon shares have dropped 10% since its second quarter earnings report because investors were concerned by management's guidance.
Amazon remains ideally positioned to benefit from artificial intelligence, and the company has consistently exceeded Wall Street's forward earnings estimates.
Only eight companies listed on U.S. stock exchanges currently have a market value above $1 trillion. They are listed as follows, in descending order. Beside each is the median target price set by Wall Street, and the implied upside compared with the share price as of Aug. 4.
Most Wall Street analysts think Amazon is the best trillion-dollar stock to buy right now. Here's what investors should know.
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Amazon reported second-quarter financial results that crushed estimates on the top and bottom lines. Sales increased 13% to $168 billion on particularly strong revenue growth in the advertising segment, coupled with solid momentum in the retail and cloud segments. Operating margin expanded 150 basis points, and GAAP earnings increased 34% to $1.68 per diluted share.
Management provided the following third-quarter guidance: Revenue will increase 11% to $177 billion, and operating income will increase 3% to $18 billion. Investors were disappointed by the weak earnings forecast. That, coupled with somewhat underwhelming growth in cloud computing sales, has caused the stock to drop 10% since the company reported its second-quarter financial results.
I think the market got this wrong. Amazon's cloud sales may have increased more slowly than Microsoft's and Alphabet's, but its sales growth is also measured on a much larger base. Amazon accounted for 30% of cloud infrastructure and platform services spending in the second quarter, while Microsoft and Alphabet accounted for 20% and 13%, respectively.
Also, Amazon gave somewhat disappointing guidance for operating income, but caution is warranted given the tariff landscape. Moreover, the same thing happened last quarter and the company beat expectations. Not surprisingly, Wall Street remains broadly optimistic. More than a dozen analysts revised their target prices higher after the second-quarter report.
The investment thesis for Amazon centers on its strong presence in three large industries. It runs the largest e-commerce marketplace worldwide by revenue, and the most popular by web traffic. It is the third largest ad tech company in the world by revenue, and the leader in the retail advertising segment. And Amazon Web Services (AWS) is the largest public cloud by infrastructure and platform services spending.
Morgan Stanley analyst Brian Nowak earlier this year called Amazon an underappreciated leader in generative artificial intelligence (AI) across its retail and cloud businesses. Details are provided below:
Importantly, Amazon has an opportunity to monetize artificial intelligence beyond its core retail and cloud businesses. Its subsidiary Zoox is building robotaxis, and the company will launch its first autonomous ride-hailing service in Las Vegas this year, followed other cities shortly thereafter. Morgan Stanley estimates Zoox could have commercial robotaxi services in seven U.S. cities by 2028.
Wall Street estimates Amazon's earnings will increase at 10% annually through 2026. That makes the current valuation of 32 times earnings look somewhat expensive. But analysts have consistently underestimated the company. Amazon topped the consensus earnings estimate by an average of 22% in the last six quarters.
Going forward, I think Amazon will continue to beat expectations as it leans on AI across its retail and cloud businesses, and branches into new markets like autonomous ride-hailing. Patient investors should feel comfortable buying a few shares of this growth stock today.
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Trevor Jennewine has positions in Amazon and Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
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