Loop Capital Sees Amazon Stock Soaring to $405 Amid Capex Concerns

Amazon's stock has been under pressure in recent weeks despite its impressive fundamentals. The company's AWS cloud segment clocked its fastest growth in 18 quarters, with a 37% year-over-year increase. However, this momentum was overshadowed by concerns over capital expenditures.

Cash capex reached $53.1 billion in Q2, while trailing-twelve-month free cash flow turned negative at -$7.6 billion. Management guided that capex would reach $200 billion by 2026, primarily for AI data centers, custom silicon, robotics, and the Amazon Leo satellite network.

Despite these challenges, one Wall Street analyst sees significant upside potential in Amazon's stock. Rob Sanderson from Loop Capital has a target of $405, implying a return of around 61% from current levels.

Sanderson's thesis is based on three pillars: AWS re-accelerating toward a 20%+ clip, structural retail margin expansion, and a scaling ad engine at roughly 70%+ gross margins. The supporting data includes AWS' $496 billion backlog growing triple digits year-over-year, management's guidance that the lion's share of 2027 capacity is already reserved, and advertising growth of 26% to $19.81 billion.