KeyBanc's Important Upgrade Decision for Amazon

KeyBanc initiated an Overweight rating for Amazon.com, setting a price target of $300. Analysts expressed that the expansion in advertising and grocery sectors will support Amazon's growth, while investors are not adequately assessing the recovery of Amazon Web Services (AWS) unit.

Advertising is expected to boost Amazon's retail earnings, while the grocery sector is predicted to make a larger contribution in the medium term. KeyBanc analysts forecast that grocery investments will enhance growth in North America through initiatives like same-day delivery expansion in over 2,300 cities in the U.S. by the end of 2025. Smaller grocery stores are expected to lose market share.

KeyBanc indicated that the market's perception of Amazon Web Services as lagging in artificial intelligence is incorrect. Analysts stated that AWS's slower growth compared to competitors is due to scale limitations, not demand loss. Additionally, new data center projects like Project Rainier are thought to accelerate growth by supporting the training clusters of the AI initiative Anthropic in 2026.

AWS accounts for approximately 60% of Amazon's operating income and maintains its leadership in the infrastructure services market with a 38% market share, ahead of Microsoft and Google. KeyBanc noted that once new capacity comes online, AWS will be well-positioned to capture AI-driven workloads.

In the advertising sector, the firm highlighted Amazon's out-of-platform advertising network as an underappreciated source of growth. The expansion of the demand-side platform (DSP) and new third-party media partnerships are expected to be key areas for additional growth. A significant portion of revenues still comes from ads on Amazon.com and Prime Video.

KeyBanc stated that Amazon is trading at 22.9 times expected earnings for 2027, which is below historical averages, indicating an attractive entry point. “We do not expect AWS to lag in the artificial intelligence revolution,” they stated.