Amazon shares are really cheap compared with competitors Walmart and Alphabet, says Jefferies

Jefferies reiterates a Buy on Amazon with a $320 price target, implying ~29% upside from Tuesday’s close, and notes the stock was up ~3% after the call. The firm cites ~12x next-12-month EV/EBITDA, a discount to 18x blended Alphabet/17x Google and 19x Walmart, and flags Amazon as a top pick among hyperscalers. It also expects an AI-linked data center buildout to support results, potentially via higher-than-expected capex guidance, arguing current capex/FCF estimates may be understated.

Analysis

The market is still treating AMZN like a blended retail/tech name, but the more interesting setup is that it is becoming one of the cleanest public proxies for the AI infrastructure spend cycle while retaining consumer optionality. If management leans into capex, the near-term drag on FCF can actually widen the moat: smaller cloud and retail competitors cannot easily match both buildout pace and fulfillment/automation intensity, which can pressure lesser-scaled players more than AMZN itself.

Second-order winners are the picks-and-shovels around the data-center build: networking, power, cooling, and high-end server suppliers should see orders before AMZN’s own economics visibly inflect. The immediate risk is that the stock rerates on narrative while the next 1-2 quarters of reported cash generation look worse because depreciation, lease, and infrastructure spend front-load the P&L/FCF burden. That means the trade works best on a 3-6 month horizon if capex guidance rises but AWS demand metrics remain firm; over 6-18 months, the key question is whether this spend produces durable share gains or just a more expensive asset base.

Consensus may be underestimating how much of the upside is already in the AI story while underestimating the downside if capex surprises to the upside without corresponding revenue acceleration. A bear case is not that AMZN spends too much, but that returns on that spend take longer than the market’s patience window and the multiple stays pinned despite growth. If AMZN raises capex and AWS growth or retail margin expansion does not re-accelerate within the next two earnings prints, the thesis starts to fail.

Key Decisions for Investors

• Long AMZN / short WMT for 3-6 months: capture the relative beneficiary of AI/infrastructure optionality versus a more defensive multiple; stop if AMZN raises capex but retail margin or AWS growth decelerates for two consecutive quarters.
• Buy AMZN 6-month 260/320 call spread into the next earnings/capex update: upside is tied to a guidance reset, while downside is defined if the market decides the higher spend is only dilutive to FCF.
• Use ANET/VRT/SMCI as secondary watchlist longs on any confirmed capex raise from AMZN; these names should react faster than AMZN itself if the buildout is truly accelerating.
• If AMZN rallies on the note but fails to hold above the post-gap level for a week, fade the move with a tactical short or put spread; that would signal the market is not yet ready to pay up for the capex story.