Morgan Stanley keeps Amazon at $335, sees $500 by 2027

Morgan Stanley kept its Overweight rating on Amazon with a $335 target, about 27 percent above the current price. The bank also laid out a bull case of $500 a share by the end of 2027, driven by AWS's path to $1 trillion in annual revenue.

"We have long believed AWS can become a multi-hundred-billion-dollar revenue business, and now we think that figure will at least double and very likely become a trillion-dollar business with attractive free cash flow and returns on invested capital," analysts led by Brian Nowak wrote in an Aug. 16 report.

AWS compute capacity is set to expand from about 14 gigawatts in 2025 to roughly 120 gigawatts by 2035, with monetization rising to $12 per incremental watt. That would lift AWS revenue from an estimated $176.9 billion in 2026 to $249.2 billion in 2027, up about 41 percent year over year. If monetization reaches $14 to $15 per watt, the trillion-dollar milestone could arrive a year earlier, in 2034.

At a 30 percent long-term EBIT margin, a trillion-dollar AWS would generate about $300 billion in EBIT. Combined with retail, company-wide EBIT could reach about $500 billion by 2034 to 2036, implying a compound annual growth rate of 16 to 20 percent. Morgan Stanley's $500 bull case capitalizes 2028 discounted EBIT at about 21 times EV/EBIT, roughly 10 percent below the peer average of about 23 times.

The bank argues Amazon's current valuation — about 11 times 2035 EBIT discounted at a 10 percent weighted average cost of capital — sits roughly 50 percent below hyperscaler and retail peers including Alphabet, Microsoft, Meta Platforms, Walmart, Costco and Netflix. That discount itself leaves room for further upside, Nowak said.

AWS revenue rose 36.7 percent year over year to $42.2 billion in the second quarter, with a backlog of $496 billion and operating margin near 39.4 percent, according to company results. Amazon expects $220 billion in cash capital expenditure for 2026.

The maintained target signals Morgan Stanley sees AWS's expansion as the primary driver of Amazon's re-rating. Investors will watch the next earnings call for updated capacity and margin guidance as the company scales toward its trillion-dollar cloud ambition.

This article is for informational purposes only and does not constitute investment advice.