Mentions

Amazon has demonstrated strong business improvement over the past five years, with revenue increasing by 80% from $400 billion to $716 billion (projected 2026), cash up 46%, assets up 154%, and operating margins nearly doubling from 5.9% to 11.2%. Despite this robust fundamental growth, the stock's price-to-sales ratio has only increased by 6.2%, and its forward P/E has actually dropped by 12.5%, leading to a significant 64% lag behind the S&P 500. The perceived issue of high capital expenditures and low free cash flow is deemed a misunderstanding, as it represents strategic investment in AWS and cloud infrastructure, positioning Amazon for continued dominance in the AI era. This disparity between strong underlying business performance and stagnant stock pricing presents a generational buying opportunity for patient investors.

Amazon's shares experienced a decline despite beating both earnings and revenue expectations, primarily due to the announcement of a nearly 60% increase in AI-related capital spending to $200 billion in 2026. The analyst views this market reaction as irrational, emphasizing that such significant investment in AI data centers, coupled with strong growth in Amazon Web Services (AWS), presents a clear buying opportunity as these expenditures are crucial for driving future AI capabilities and revenue.