Key Takeaways
- Amazon shares rose 5% today after Morgan Stanley named the stock a Top Pick and raised its price target to $350 from $335.
- Morgan Stanley’s margin forecast for AWS is close to what AWS already earns, so the bigger question is whether its growth keeps speeding up.
- Analyst Brian Nowak’s roughly $16.50 of 2028 earnings per share is about 24% above the analyst consensus of $13.26.
- Amazon’s third-quarter report on Oct. 29 is the first test, and AWS’s growth rate is the number to watch.
Amazon (AMZN) shares are up 5% today after Morgan Stanley named the stock a Top Pick before the open, kept its Overweight rating, and raised its price target to $350 from $335.
That’s about 40% above Friday’s close. Analyst Brian Nowak thinks the market is missing why, writing that Amazon’s “growth and profit runway is under-appreciated.”
It starts with AWS
The first of Nowak’s five catalysts is faster growth at AWS. He now expects AWS revenue to grow 47% in 2027 and 42% in 2028, up from his earlier 41% and 37%. He raised them after NVIDIA (NVDA) said it expects AWS to buy and deploy about 2 million of its GPUs over those two years.
That’s a lot to ask. AWS grew 37% in the second quarter of 2026, its fastest pace in 18 quarters, so Nowak needs that growth to keep speeding up.
If it does, it adds to a top line that analysts already expect to pass $1.1 trillion in 2028…
The margins look like the easier part. Nowak sees AWS operating margins of 42% in 2027 and 44% in 2028, and AWS is already most of the way there: in the second quarter it earned $16.6 billion of operating income on $42.2 billion of sales, about 39%.
And Amazon as a whole has more than doubled its operating margin, from 5.3% in 2021 to 11.2% in 2025…
The Street is a quarter short
Those AWS margins get Nowak to about $16.50 of earnings per share in 2028. The consensus is well below that…
Analysts expect around $13 for 2028, which puts Nowak about 24% above the Street, and that gap is the “under-appreciated” part. His $350 target works out to about 21x his 2028 estimate, while his note had the stock at about 15x before today’s jump.
Of course, all those GPUs cost money. Morgan Stanley’s own forecast has Amazon’s capital spending climbing to $355 billion in 2027 and $365 billion in 2028, from the roughly $220 billion Amazon expects to spend this year.
Oct. 29 is the first test
My take: Nowak’s margin forecast is close to what AWS already earns. So if the chips arrive on schedule, there’s plenty of upside from here.
Amazon reports its third quarter after the bell on Oct. 29. AWS’s growth rate is the number to watch. If it doesn’t keep climbing from 37%, 47% next year starts to look like a stretch.
So what is Amazon stock actually worth?
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
