UBS Sets Bold Amazon Stock Target Ahead of Earnings

What happened

UBS raised its Amazon price target to $348 from $318 and kept a Buy rating ahead of October 29 earnings. UBS expects Amazon Web Services profit margins of 46% in 2027, above Wall Street's roughly 38%, helping offset heavy artificial intelligence spending.

Confirmed

Global impact / market context

If UBS is right, Amazon's cloud business could earn much more profit per sale than analysts expect, which would make the stock look cheaper. That matters because investors have worried that huge capital spending, meaning money spent on long-term assets, could push cash available toward zero.

Analyst inference

Wall Street is debating whether Amazon's capital spending could exceed $300 billion in 2027, which might leave free cash flow, the cash left after spending, near zero or negative. UBS argues this worry has hidden improving earnings potential in AWS, creating a gap between its view and consensus estimates.

Analyst inference

What to watch

1. Amazon reports earnings on October 29, when investors can compare actual AWS profit margins and spending with UBS's forecasts. Confirmed
2. Watch whether UBS's 46% AWS operating margin forecast for 2027 gains support from other analysts or remains far above the roughly 38% consensus estimate. Proposed
3. Track Amazon's capital spending plans, since spending above $300 billion in 2027 could push free cash flow toward zero and test UBS's view that AWS profits offset it. Analyst inference

Evidence

• gurufocus.com