KeyBanc says Amazon could soar more than 30% as investors continue undervaluing its AI story

KeyBanc Capital Markets initiated coverage on Amazon (AMZN) with an Overweight rating and a $300 price target, implying a 36% upside, citing an attractive valuation at 22.9x 2027E P/E. The bank anticipates significant growth drivers from Amazon Web Services (AWS), expecting revenue acceleration into 2026 fueled by AI initiatives like gigawatt data centers and partnerships, countering investor pessimism. Additionally, KeyBanc highlighted potential gains from expanded advertising partnerships leveraging Amazon's unique data and continued market share capture in the grocery business through delivery expansion.

Analysis

KeyBanc Capital Markets has initiated coverage on Amazon (AMZN) with an Overweight rating and a $300 price target, suggesting a significant 36% upside from its recent closing price. The bank views the current valuation of 22.9x 2027E P/E as an attractive entry point, despite AMZN shares adding less than 1% year-to-date. This bullish stance contradicts recent market performance and implies a strong future outlook.

A primary catalyst for this positive outlook is the anticipated acceleration of Amazon Web Services (AWS) growth into 2026, particularly from artificial intelligence initiatives. KeyBanc highlights the ramp-up of gigawatt data center clusters (e.g., Project Rainier) and new customers like Anthropic, directly addressing investor pessimism about AWS's competitive position. The bank asserts AWS is growing absolute revenue dollars near or better than competitors, indicating robust underlying performance.

Beyond cloud, KeyBanc identifies advertising and grocery as additional profit drivers. Amazon's exploration of third-party advertising partnerships, leveraging its unique data set, is expected to fuel incremental growth, positioning it favorably against competitors like Google's Network business. Furthermore, the expansion of same-day perishables delivery to over 2,300 U.S. cities by 2025 underscores Amazon's strategy to capture market share in the grocery sector.

Key Decisions for Investors

• Investors should consider the attractive entry point for AMZN shares, given KeyBanc's Overweight rating and 36% implied upside based on a 22.9x 2027E P/E.
• Monitor AWS's revenue acceleration and AI-driven initiatives, as these are critical catalysts expected to counter investor pessimism and drive growth into 2026.
• Evaluate Amazon's diversified growth strategies in advertising and grocery, particularly the expansion of third-party ad partnerships and same-day perishables delivery, for their potential to contribute incremental revenue.