Amazon stock is 'too cheap', Jefferies says

Investing.com -- Amazon shares are undervalued ahead of a coming acceleration in its cloud business, according to Jefferies analyst Brent Thill, who argued in a note to clients that the stock trades at a level that does not reflect its strengthening fundamentals.

Thill wrote that Amazon “trades at 13x NTM EV/EBITDA, 6 turns below [its] 10-yr avg and 8 turns below WMT.”

“We think that’s too cheap at [the] early stage of AWS re-acceleration,” he added.

Jefferies believes Amazon’s cloud unit is positioned for a clear pickup in growth, describing AWS as “primed for re-acceleration.”

Thill pointed to three drivers that could lift backlog growth into “mid-20s or higher” in the fourth quarter, including the “easiest comp of the year,” a strong start to the quarter with October bookings alone, including the $38 billion OpenAI deal, “surpassing all of Q3’s deal volume,” and “bullish expert checks across the board.”

The bank added that AWS revenue should “catch up to backlog growth over time.”

Jefferies also cited resilient consumer spending and operational improvements within Amazon’s retail operations.

Checks reportedly showed “solid ecomm performance, robust cloud strength, and logistics efficiency improvements,” with the firm viewing fourth-quarter EBIT expectations of about $26 billion as “reasonable.”

The stock’s valuation remains a key part of Jefferies’ bullish stance. Thill said Amazon trades at a 25% discount to major internet peers and is “well below” its long-term average.

Jefferies sees “25% upside” based on its sum-of-the-parts valuation. The firm reiterated its Buy rating and $300 price target on the stock.

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