Why Amazon Stock Has 40% Upside Even as Meta’s Muse Changes the E-Commerce Landscape

Amazon stock has fallen 12% since early August and the AI trade came under significant pressure last week. (BELGA MAG/AFP via Getty Images)

Key Points

• Morgan Stanley analyst Brian Nowak raises his price target on Amazon to $350 from $335 and makes the stock a ‘top pick.’
• Nowak expects Amazon’s cloud platform, AWS, to maintain outsized top-line growth through 2028, leading to significant profit.
• The analyst believes Amazon is a key AI winner even as Meta Platforms’ consumer AI agent Muse threatens traditional e-commerce.

The artificial-intelligence trade took a significant hit last week but Wall Street remained bullish on shares of Amazon.com as the e-commerce and cloud computing giant remains poised to be a major AI winner.

Morgan Stanley analyst Brian Nowak raised his price target on Amazon to $350 from $335 and made the stock a “top pick” based on the belief there are multiple reasons why shares can move significantly higher. He maintained his Overweight recommendation on the stock.

Amazon stock rose 1.3% to $253.12 in premarket trading on Monday after ending last week down 4.7% at $250. Nowak’s new price target represented 40% upside from the stock’s closing price on Friday.

Nowak said in a research note that while the stock market has been reduced to “see-sawing AI leaders and laggards,” Amazon stock is still a good bet to move higher.

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The analyst expects AWS, Amazon’s cloud computing platform, to maintain “outsized” top-line growth through 2028 leading to significant profit.

Arguably even more important to Nowak was that Amazon is a “key” AI “enabler and winner” even as Meta Platforms’ consumer AI agent Muse threatens traditional e-commerce.

“We expect AMZN to leverage its leading e-commerce infrastructure
and loyal user base to continue to monetize,” Nowak said. “If Muse’s holiday season shopping offerings don’t go well without Amazon, that could also be a proof point of the importance of Amazon to scaling agentic commerce.”

While Morgan Stanley was confident Amazon stock will rise sharply from Friday’s trading levels, shares have been on a downward trajectory lately.

The stock has fallen 12% since closing at $284.02 on Aug. 3, and has dipped below its 50-day moving average around the $257 price level.

With Wall Street dialed in on the AI narrative around compute and capital spending demand versus scrutiny around how these efforts are being funded, Amazon stock may be in for a test this week with the first batch of big tech earnings.

Write to Kit Norton at kit.norton@barrons.com

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