Citizens analyst Andrew Boone reiterated a Market Outperform rating on Amazon.com, Inc. (NASDAQ: AMZN) with a $315 price target, arguing the stock deserves a richer multiple than it currently trades at. AWS grew 37% year-over-year in Q2 2026 and now drives roughly 60% of Amazon's operating income, but a swing to negative free cash flow tempers the bull case.
Citizens' analyst Andrew Boone reiterated a Market Outperform rating on Amazon.com, Inc. (NASDAQ: AMZN) and kept his $315 price target, arguing the stock deserves a higher valuation than the 23.8x 2027E GAAP EPS and 10.9x 2027E EBITDA it currently trades at. Citizens points to two factors behind that view, one of which is Amazon's cloud computing leadership through AWS.
AWS drives the bull case
AWS holds an estimated 28% share of the cloud infrastructure market, and its second-quarter 2026 results back Citizens' optimism. Net sales grew 37% year-over-year to $42.2 billion, while segment operating income climbed to $16.6 billion from $10.2 billion a year earlier. That means AWS now accounts for an estimated 60% of Amazon's operating income while contributing one-fifth of revenue.
The unit has become a $169 billion annualized revenue run rate business, with Amazon building a narrative around its custom silicon. The chips business and AI-specific revenue each carry a run rate over $25 billion. On the retail side, North America segment sales rose 16% to $116.2 billion. Operating income there climbed to $9.1 billion, supported by the company's fulfillment network.
Capital spending pressures free cash flow
However, the growth carries a cost. Amazon raised its expected 2026 capital expenditures to an estimated $220 billion, and trailing twelve-month free cash flow fell to an outflow of $7.6 billion despite operating cash flow rising 33%. Amazon also raised prices for certain EC2 Capacity Blocks for ML twice this year due to tight compute supply, a sign AWS is running close to capacity.
Hedge funds keep buying
Amazon draws heavy hedge fund interest. As of the second quarter of 2026, 369 hedge funds held positions in the stock, up from 353 in the prior quarter. Short interest stood at 95.30 million shares, representing 0.97% of the public float, pointing to limited bearish skepticism against the stock.
Citizens' 29-times-earnings multiple becomes easier to justify if Amazon's AI infrastructure spend translates into sustained, high-margin AWS growth. Demand currently appears to be keeping pace, but the free cash flow outflow remains the clearest number betting against the stock.
Source: Insider Monkey
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