Amazon's stock faced pressure in early trading Monday following a price target reduction by Bank of America, reflecting investor apprehension over the company's aggressive capital expenditure plans. The analyst maintained a Buy rating but lowered the target to $275 from $286, noting the competitive AI investment landscape is an industry-wide phenomenon.
Cash Flow Under Scrutiny
The core concern centers on Amazon's financial metrics. The company has outlined intentions to deploy approximately $200 billion in capital expenditures during 2026, primarily for data centers and long-term assets. This substantial outlay contrasts with its trailing twelve-month free cash flow, which has decreased to $11.2 billion. CEO Andy Jassy confirmed the ambitious spending plan in a recent earnings statement.
Divergent Analyst Views
Wall Street sentiment remains bullish on Amazon, but price targets show significant dispersion. According to a recent survey, the average 12-month price target stands at $283.49, despite the stock falling over 13% last week. Analysts express mixed views: UBS maintains a $301 target, while Evercore ISI lowered its target to $285, warning 2026 could see negative free cash flow. Piper Sandler cited the capex forecast for spooking the market, reducing its target to $260.
Conversely, Oppenheimer raised its target to $315, expressing optimism about growth prospects for Amazon Web Services (AWS), projecting 24% revenue growth for the cloud division in fiscal 2026.
Broader Market Implications
The scale of Amazon's planned investment has drawn comparisons to the dot-com era's infrastructure boom. Analysts note that while increased capital intensity was expected, the magnitude surpasses consensus estimates. The key risk is that elevated spending could pressure profits and strain cash flows if anticipated demand growth does not materialize. Bank of America highlighted additional challenges, including competitive pressures, cloud cost optimization by AWS customers, and regulatory scrutiny.
Investors are now closely monitoring whether these massive investments will translate into sustainable revenue growth for AWS and the broader retail segment, rather than merely increasing operational costs and depreciation expenses.
