Citizens’ analyst Andrew Boone recently reiterated a Market Outperform rating on Amazon.com, Inc. (NASDAQ:AMZN) with a $315 price target. The firm noted that Amazon trades at 23.8x 2027E GAAP EPS and 10.9x 2027E EBITDA. However, it believes that the stock deserves to trade at a higher valuation.
Why Amazon Deserves a Higher Valuation
Citizens believes that two factors support a higher valuation for Amazon.com, Inc. (NASDAQ:AMZN), one of which is its cloud computing leadership through Amazon Web Services. AWS is currently the undisputed leader in cloud infrastructure with an estimated 28% of market share.
In the second quarter of 2026, AWS net sales grew 37% year-over-year to $42.2 billion. Operating income for the segment grew to $16.6 billion from $10.2 billion a year ago. This means that AWS accounted for an estimated 60% of Amazon’s operating income while contributing one-fifth of revenue.
AWS is now essentially a “$169 billion annualized revenue run rate business,” with the company now building a narrative around their custom silicon. The business has a chips revenue run rate “over $25 billion,” and an AI-specific revenue run rate also “over $25 billion.”
On the retail side, North America segment sales rose 16% to $$116.2 billion. Operating income climbed to $9.1 billion, supported by the company’s efficient fulfillment network.
The Bear Case
Amazon may have a good growth trajectory, but that doesn’t come without a cost. In the second quarter, the company raised expected 2026 capital expenditures to an estimated $220 billion while trailing twelve month free cash flow fell to an outflow of $7.6 billion. This is despite operating cash flow rising 33%.
The company also rose its prices for certain EC2 Capacity Blocks for ML twice this year due to tight compute supply. This is a sign that AWS is running close to capacity and that massive capex outpacing AI and cloud monetization may lead to sustained FCF pressure.
Analysis and Bottom-line
Amazon is backed by huge hedge fund interest. As of the second quarter of 2026, 369 hedge funds held positions in the stock, up from 353 in the prior quarter. Market Beat reports short interest of 95.30 million shares sold short for the stock as of August, representing 0.97% of the public float. The number also justifies limited bearish skepticism against the stock.
Overall, Citizens 29 times earnings multiple becomes easier to justify if its AI infrastructure spend effectively translates into sustained, high-margin AWS growth. Demand currently appears to be keeping pace, backing the firm’s bullish view. However, the free cash flow outflow is the clearest number betting against the stock.
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