Amazon's stock is this analyst's 'best idea' because of these 3 reasons

By Christine Ji

Amazon's cloud, advertising and e-commerce businesses will drive revenue and margin growth in 2026, according to TD Cowen

TD Cowen analyst John Blackledge sees 30% upside for Amazon's stock from current levels.

Amazon.com is heading into the new year with significant momentum, according to TD Cowen, which just named the tech giant its top mega-capitalization internet pick.

In a Wednesday note, analyst John Blackledge highlighted Amazon's (AMZN) cloud growth, e-commerce and advertising businesses, as well as a continued increase in profitability, as drivers of upside for the stock.

Amazon hasn't been a popular "Magnificent Seven" name this year, as it has gained just 5% since the start of 2025. However, Blackledge said the stock can deliver roughly 30% upside from current levels, reiterating his buy rating and $300 price target.

The biggest factor for investors is continued revenue growth in Amazon Web Services, which reaccelerated to 20% in the third quarter. Blackledge raised his AWS revenue estimates by around 2% annually for the 2025 to 2030 period, citing growth in both core and artificial-intelligence workloads and improving capacity.

In November, Amazon announced a $38 billion deal with OpenAI to provide cloud-computing services, signaling a growing stream of future AI revenues. Amazon's backlog, or future contracts not yet recognized, will continue to be a key data point for investors. As of the third quarter, Amazon's backlog was $200 billion, excluding the OpenAI deal.

Blackledge now expects AWS revenue to hit $358.1 billion by 2030 and reach a 22.8% growth rate, exceeding FactSet consensus estimates of $325.4 billion.

See more: How Amazon's stock could soar 30% thanks to its cloud business

Beyond AWS, Blackledge pointed to Amazon's advertising segment as an "underappreciated" part of the overall company. Amazon's advertising business has grown over 20% annually since 2019 due to sponsored-product listings, the company's demand-side platform and video ads on Prime.

Increasing viewership on Prime Video, which has effectively caught up to streaming rival Netflix (NFLX), signals a growing opportunity for ads.

TD Cowen's proprietary data showed that Prime Video's monthly active user penetration is 57.8%, putting it neck-and-neck with Netflix's 58.0%. Blackledge notes that while Prime Video has historically lagged behind, the gap has narrowed significantly and created a massive audience for video ads.

What makes the ad business so powerful is its low operating costs, which can offset more capital-intensive segments such as AWS. Blackledge estimates that ads could bring in $68 billion in revenue and comprise up to 35% of Amazon's total operating income in 2025.

Also read: Amazon's 'crown jewel' is this business that doesn't get nearly enough attention

Amazon's push to expand into same-day delivery services should also drive growth in e-commerce, especially in grocery delivery. The company is aiming to reach 2,300 U.S. locations by the end of 2025.

"Ramping delivery speeds and lower cost to serve" are leading to Prime customers purchasing consumables such as household goods at a more frequent pace, Blackledge wrote.

Amazon has been investing heavily in delivery and fulfillment logistics, utilizing automation and robotics to drive warehouse traffic improvements and inventory efficiency. These initiatives are expected to bring down costs for the e-commerce unit and improve Amazon's margins.

Read: Amazon's next stock catalyst isn't AI - it's online groceries

-Christine Ji

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12-10-25 1031ET