Written by Aries Yuangga
Summary
Amazon (NASDAQ: AMZN) just delivered one of its cleanest quarters in years, yet the stock is down ~10% from post-earnings highs as part of a broad AI / mega-cap de-risking. This looks much more like sentiment puke than a fundamental problem.
Key points:
- Q3’25 was an inflection quarter:
- AWS growth re-accelerated, with record backlog (~US$200B).
- High-margin lines are firing:
- 3P services +11%
- Advertising +22%
- Subscriptions +10%
- Operating margins at record levels, with management still talking further improvement.
- Current selloff is driven by macro/AI jitters, not AMZN-specific issues:
- Concerns about “AI bubble”, overbuild, and capex scares after comments from OpenAI, Burry, Satya, Pichai, etc.
- Yet for Amazon, higher capex is tied to visible demand (AWS backlog, fulfillment, ads).
- At ~US$222–225, AMZN trades around 29x 2026E EPS (Street numbers that are likely too conservative) vs a 20%+ EPS CAGR multi-year story.
- Author in source piece targets US$305 (≈32x 2027E EPS) → ~35% 12-month upside if sentiment normalizes and AWS momentum continues.
Thesis: this is Google-2024 redux. Fundamentals are separating from sentiment. You’re getting a top-tier compounder at a discount because the AI trade got overcrowded elsewhere.
Rating: STRONG BUY, use this drawdown to build/scale a core long-term position.
Technical Analysis
Current Price: ~US$222.55
Key Levels
- Nearest Resistance Zones
- US$250–252 → prior supply / recent local high (your mid band at 250.37).
- US$258–260 → upper resistance band / extension of the last spike.
- Accumulation Buy Zone (marked on your chart)
- Upper edge: ~US$218.15
- Lower edge: ~US$211.03 → This 218–211 range lines up with:
- Prior consolidation zone.
- Clean horizontal demand area before the last leg up.
- Deeper Support / Invalid Area
- Below US$211, next logical structural shelf is the low-200s cluster from June–July.
- A weekly close < US$205–200 would signal the current breakout leg is failing and we’re back into a broader range.
Read
- The post-earnings spike above US$250 has fully retraced on sentiment selling, not on any AWS/retail/ads blow-up.
- Current price is testing the first demand band; your Accumulation Buy Zone 218–211 is the sweet spot to let panic sellers exit and patient buyers step in.
- As long as price holds above ~US$211 on a weekly basis, the broader uptrend from early 2025 remains fully intact and a move back toward US$250–260 is the base case once sentiment stabilizes.
Trading Setup
DCA Plan (Long-Term Investor Focus)
Goal: build/scale a multi-year core position while respecting volatility.
- 40% size between US$222–218 (current area into top of buy zone).
- 35% size between US$218–211 (inside your Accumulation Buy Zone).
- 25% size staggered US$211–205 (defensive bids if the flush overshoots).
Full-fill scenario gives an average cost roughly in the US$215–218 range.
Risk Management
For swing / leveraged traders:
- Hard risk line:
- Tight version → cut / reduce if daily close < US$211 and doesn’t reclaim quickly.
- Conservative version → weekly close < US$205 confirms breakdown of this leg; step aside and wait for a new base.
For long-term holders (3–5+ years):
- Use a fundamental stop instead of pure price stop. Thesis breaks only if:
- AWS growth structurally decelerates and fails to benefit from AI workloads.
- Company walks back on margin discipline and FCF turns structurally weak again.
- Capex cycle clearly destroys ROI (FCF doesn’t expand after build-out).
Take Profit Framework
- TP1: US$250–252
- Retest of breakdown area / prior post-earnings high. Trim 15–25% if position oversized.
- TP2: US$258–260
- Major band; de-risk another 15–25% for traders.
- Stretch Target (12-18 months): US$300–305
- In line with the US$305 fair-value target (≈32x 2027E EPS).
- Suitable level to take aggressive profits on trading capital while leaving a core LT stake.
Options / Income Ideas (Optional)
- Sell cash-secured puts in the US$215–210 range (30–45 DTE):
- Get paid to wait for entry around your buy zone.
- If assigned and holding shares:
- Write covered calls at US$280–305 out a few months to monetize volatility while you ride the trend.
Why the Thesis Works (Pillars)
1️⃣ AWS Is Re-Accelerating Right When Bears Scream “Overbuild”
- AWS backlog reportedly ~US$200B, roughly 2x sejak ChatGPT diluncurkan.
- AWS monetizes that backlog at ~35% operating margins, heavily recurring.
- Q3 showed better-than-feared and now improving growth in AWS, which was the main overhang on the stock.
This is exactly what you want to see at the start of a multi-year AI infra cycle: backlog + margin + acceleration.
2️⃣ High-Margin Flywheels (3P, Ads, Subscriptions) Are Firing
- 3P services: +11%
- Advertising: +22%
- Subscriptions: +10%
These segments:
- Carry higher margins than 1P retail.
- Scale with traffic & engagement rather than pure unit volume.
- Help push consolidated operating margin to record levels, a trend mgmt expects to continue.
Margin + growth together is the blueprint for EPS compounding; that’s what you’re buying here.
3️⃣ Capex “Scare” = Same Old Amazon Playbook
- Bears: “Capex too high, AI infra overbuild, ROI questionable.”
- Reality: we’ve seen this exact movie in 2021-2022 with the fulfillment build-out:
- FCF temporarily collapsed.
- Once capacity normalized and utilization rose, FCF inflected to all-time highs.
- Stock nearly tripled from the bottom of that capex cycle.
Today:
- AWS capex is backed by record backlog & visible demand.
- We’re again in the pain part of the cycle (high spend, headlines about overbuild) that usually leads to the payoff part (FCF surge, multiple expansion) later.
4️⃣ Valuation vs Growth: Not Bargain Basement, But Attractive for the Quality
- Around 29x 2026E EPS with:
- 20%+ EPS CAGR runway,
- AWS + ads + 3P still in secular growth.
- Reasonable fair-value band for a giant like AMZN: 32–40x depending on macro & rate regime.
- Source article uses 32x 2027E EPS → US$305 PT (~35% upside in 12 months).
Given the quality of franchise + balance sheet + reinvestment runway, paying high-20s / low-30s multiple is rational, not reckless.
Valuation & Scenarios (High Level)
Base Case (Your “Google-Like Run”) — 12–24 Months
- AWS growth re-accelerates again in Q4 and into 2026.
- Margins continue grinding higher as high-margin segments outgrow retail.
- Market re-rates AMZN from ~29x 2026E to ~32x 2027E (source PT).
→ Price path: back to US$250–260, then grind to US$300–305. → Implied total return: ~35%+ over the next year, potentially more over 2–3 years.
Bull Case
- AI workload demand for AWS surprises to the upside; backlog keeps compounding.
- Ads business continues to print 20%+ growth with strong incremental margins.
- Capex payback shows up clearly in FCF; Street upgrades en masse.
- Multiple expands toward 35–40x given visibility & quality premium.
→ Stock can overshoot US$320–340 in 2–3 years.
Bear Case
- Macro shock or AI sentiment crash leads to slower AWS / ads growth.
- Capex investor fatigue returns; narrative shifts to “overbuild” for an extended period.
- EPS growth slows; multiple compresses to low-20s.
→ Stock could chop sideways or even trade back toward US$190–200 for a while.
→ Long-term holders can still DCA and rely on EPS compounding, but volatility will hurt.
Key Risks
- AI / Macro Sentiment Swings: Another leg down in AI names could drag AMZN temporarily regardless of its own numbers.
- Capex Mis-timing: If the build-out materially overshoots real demand, ROI timeline lengthens and FCF disappoints.
- Cloud Competition: Azure & GCP could capture disproportionate AI share, capping AWS’s growth and margin.
- Regulatory / Anti-trust: Amazon constantly in regulatory crosshairs globally; remedies could constrain some business lines.
None of these individually kill the thesis, but they change the slope (and volatility) of the compounding curve.
Conclusion
Amazon today = elite fundamentals, discounted by sentiment noise.
- AWS is inflecting up,
- High-margin flywheels (ads, 3P, subs) are compounding,
- Margins & FCF are structurally improving,
- Valuation is reasonable for a 20%+ EPS grower,
- And the current selloff is driven primarily by AI bubble chatter, not company-specific deterioration.
If you waited for “a pullback to buy AMZN,” this is literally it.
The rational play for a long-term investor:
- Size sanely (respecting mega-cap concentration).
- DCA into 222–211, lean harder inside the Accumulation Buy Zone.
- Ignore short-term AI panic, track AWS/ads/FCF trends instead.
- Let the Google-style repricing from sentiment → fundamentals do its work.
Verdict: STRONG BUY.
Accumulate between US$222–211, aim for US$250–260 as the next leg, and US$300+ over the next cycle if execution stays on track.
Disclaimer
Gotrade is the trading name of Gotrade Securities Inc., registered with and supervised by the Labuan Financial Services Authority (LFSA). This content is for educational purposes only and does not constitute financial advice. Always do your own research (DYOR) before investing.
