Wall Street Bets Big on Amazon’s Comeback Potential

The technology sector's prodigal son appears to be returning to favor, with prominent Wall Street institutions expressing renewed confidence in Amazon's prospects. In a notable show of support, two major investment firms have significantly upgraded their assessments of the e-commerce giant just ahead of its quarterly earnings release. This bullish sentiment raises a crucial question: are market professionals correctly identifying a turnaround story, or is Amazon still grappling with growth challenges?

Financial analysts are demonstrating remarkable optimism toward Amazon's future performance. KeyBanc Capital Markets initiated coverage with an "Overweight" rating and established a $300 price target—representing a substantial 35% premium to current trading levels. According to analyst Justin Patterson, investor pessimism has been overdone, particularly regarding the company's AWS cloud computing division.

Patterson's analysis suggests Amazon's advertising segment is driving improved commerce margins, while grocery sales could emerge as a significant growth driver. He also notes that the company's shares are trading well below historical averages, positioning Amazon as an unusual value opportunity within the technology sector.

This upgrade followed another positive assessment from Stifel Nicolaus just two days earlier, which raised its price objective from $260 to $269 per share. Analyst Mark Kelley cited stable consumer spending patterns and the expansion of same-day delivery services for Prime members as potential catalysts that could drive performance into 2026.

Critical Earnings Test Approaches

All eyes now turn to October 30, when Amazon's quarterly results will undergo intense scrutiny. The AWS cloud business represents the most critical component of this evaluation, having generated $30.9 billion with 17.5% growth in the second quarter. However, operating margins contracted from 39.5% to 32.9% during this period, reflecting substantial investments in artificial intelligence infrastructure.

Market expectations are clearly defined: analysts project revenue will increase by 12% to $177.85 billion, with earnings per share anticipated to rise 9.7% to $1.57. Amazon's own guidance ranges between $174 billion and $179.5 billion for the quarter.

Should investors sell immediately? Or is it worth buying Amazon?

Underperformance Creates Opportunity

Amazon has delivered disappointing returns throughout 2025, with shares remaining essentially flat since January while the S&P 500 index has advanced nearly 20%. This performance establishes Amazon as the weakest component among the "Magnificent Seven" technology stocks.

Further complicating matters, an AWS service disruption on October 20-21 affected global operations. Paradoxically, these negative developments may now be creating the foundation for a potential trend reversal.

High-Stakes Investment Strategy

The upcoming quarterly report will reveal whether Amazon's multibillion-dollar AI investments are beginning to yield returns. With projected total investments reaching $118 billion for 2025, shareholders are eagerly awaiting concrete evidence of success.

The advertising business continues to serve as a bright spot, having expanded by 23% in the second quarter. Analyst sentiment remains overwhelmingly positive, with 44 buy recommendations and zero hold or sell ratings currently in place. The average price target of $269 suggests approximately 20% upside potential from current levels.

The fundamental question remains: will Amazon's anticipated recovery materialize in the near term, or must investors maintain patience as the company's strategic investments mature?